JPMorgan Considers Stablecoin as Banks Rethink Tokenized Deposits

JPMorgan Chase is weighing whether to issue its own stablecoin, the Wall Street Journal reported August 26. The bank said it has no current plans to launch one, while a spokesperson said it would consider its options based on customer demand and regulatory developments.

JPMorgan already operates JPM Coin, a tokenized deposit product built on its Kinexys blockchain. A stablecoin would sit outside the insured-deposit framework that banks have used to distinguish their digital money from Tether and Circle's offerings. JPM Coin transactions settle on Kinexys, the bank's blockchain network, which has been running since 2020.

The consideration comes as more than a dozen financial institutions, including Bank of America, Wells Fargo and Santander, advance a joint stablecoin venture aimed at corporate clients, the Journal reported, citing sources. The token is expected to launch as a dollar-denominated asset before expanding to the euro and other G7 currencies.

Among the banks involved, JPMorgan and Bank of America both hold Alpha Scores of 67 (Moderate), while Wells Fargo holds 61 (Moderate), according to AlphaScala data.

Banks have historically favored tokenized deposits over stablecoins because those deposits remain tied to insured accounts. Tokenized deposits are a liability of the bank, insured up to FDIC limits. Stablecoins are typically backed by reserves held in custody, with the issuer sitting outside that framework. That structural difference has been the core of banks' resistance.

That position has shifted as non-bank companies, including Visa, BlackRock, Google and DoorDash, move into a stablecoin market long dominated by Tether and Circle. The list spans payment networks, asset management, technology and food delivery, a sign that stablecoin use is spreading beyond crypto trading.

S&P Global Ratings warned in June that a marked increase in stablecoin usage would have material implications for US banks, particularly if stablecoins became widely used for payments in the US. The rating agency said the direct threat to deposits remained limited because stablecoins were mostly used outside the US and as settlement assets. The Dallas Fed has warned about the risk of rate wars from tokenized deposits.

S&P and the executive survey both frame the risk in conditional terms. The threat to deposits would become material if stablecoins moved from settlement assets to everyday payment instruments, or if consumers could earn rewards on their holdings. Neither condition is in place today.

By July, roughly two-thirds of US bank executives surveyed by S&P Global Market Intelligence said their banks could lose deposits to stablecoins if consumers were allowed to earn rewards on them. That condition is not met today.

Research from Oliver Wyman on Citi's scenarios through 2030 found that stablecoin growth could raise banks' funding costs and cut revenue from cross-border payments, while opening new revenue from stablecoin redemptions and related services. Cross-border payments are a significant source of fee income for large banks, and stablecoins settle 24/7 without correspondent banking. The scenarios point to a trade-off between lower-cost funding and new fee income. Deposit outflows would force banks to pay more for wholesale funding or compete for deposits with higher rates, the research said.

The shift is also appearing at the infrastructure level. On August 26, the BankChain Alliance was formed by 39 US state banking associations, aiming to build bank-owned infrastructure for tokenized deposits and stablecoins, with programmable payments as a later phase. The associations represent hundreds of financial institutions and are selecting a technology partner. The alliance's structure gives smaller banks a route into tokenized payments without building the technology themselves.

The alliance follows other bank-led blockchain projects, including an on-chain money initiative involving JPMorgan, Bank of America, Citi, BNY and Wells Fargo. Those projects have focused on moving money between banks on a shared ledger, rather than issuing a public stablecoin. The new ventures go further, putting banks directly into the stablecoin market.

JPMorgan Global Research has projected the stablecoin market could reach $500 billion to $750 billion in the coming years. The bank's researchers have also described stablecoins as a potential settlement mechanism for tokenized assets, tying stablecoin growth to the broader push to put securities on blockchain. Tokenized assets such as money market funds and bonds need a settlement asset that moves on the same ledger, and stablecoins fit that role. That projection helps explain why banks that once resisted stablecoins are now exploring issuance, even as they continue to build out tokenized deposits.

The regulatory path for stablecoins in the US remains unresolved. A federal framework would determine whether banks can issue stablecoins directly and hold the reserves. The spokesperson cited regulatory developments as a factor in the decision.

The BankChain Alliance expects to select its technology partner before targeting a 2027 launch. The joint stablecoin venture, by contrast, is expected to launch in dollars first, with a euro version and other G7 currencies to follow. No launch date has been reported for the venture.