Competition for dominance in on chain finance: Who will define the new order?

Competition for dominance in on chain finance: Who will define the new order?
JP Morgan is issuing deposit tokens on a public blockchain and integrating the technology into the existing order. In contrast, Circle has created a completely technology-based new order by establishing a trust bank.

It is interesting that these two participants with vastly different backgrounds and methods are now embracing new technologies and building new institutions. This strategy ultimately blurred the boundaries between them.

However, this identity ambiguity may also weaken their inherent competitive advantage, as experienced by the fintech industry before. Therefore, each participant needs to understand their own ‘unfair advantage’ and find a balance between technology and institutions.

Battle for on chain financial infrastructure
Blockchain technology is becoming a new cornerstone of global financial infrastructure. Traditional financial institutions and native crypto companies are fiercely competing for leadership in the next generation of financial systems. JPMorgan Chase improves efficiency by integrating blockchain technology into traditional financial systems, while Circle is committed to building a new financial infrastructure entirely based on blockchain as an alternative to traditional structures.

This model is similar to the competition between fintech and tech finance driven by large tech companies in the past. However, the current competitive landscape is vastly different. In the past, competition mainly focused on improving user experience and providing limited financial services, but now competition has penetrated into the core infrastructure level, covering asset issuance, fund flow, transaction settlement, and asset custody.

This competition is not only about technological advantages, but also about who will design and operate the future financial ecosystem. Traditional financial institutions attempt to gradually transform within existing regulatory and systemic frameworks, while native crypto companies focus on technological efficiency and scalability, building a new order. This report will explore the on chain finance strategies of JPMorgan Chase and Circle, analyze the development direction of on chain finance infrastructure, and how each participant shapes the new global financial order.

JPMorgan Chase: Building a blockchain on top of traditional finance
In June 2025, JPMorgan’s blockchain division Kinexys began piloting Deposit Tokens (JPMD) on the public blockchain base. Previously, JPMorgan Chase only applied blockchain technology on a small scale on private blockchain infrastructure. This time, JPMorgan Chase has adopted a different strategy, issuing assets directly on the open network and supporting on chain trading. This marks an important turning point for traditional financial institutions to directly operate financial services on public blockchain. JPMD combines the characteristics of digital assets and traditional deposits. When a customer deposits US dollars into JPMorgan Chase, the bank records it as a deposit on its balance sheet and subsequently issues an equal amount of JPMDToken on the public blockchain. These tokens can freely circulate on the blockchain while retaining the legitimate right to claim bank deposits. Token holders can exchange for USD cash at a 1:1 ratio and may enjoy deposit protection and interest income. Unlike traditional stablecoins that concentrate profits on the issuer, JPMD provides users with more substantial financial benefits.

These features provide practical convenience for asset managers and investors beyond conventional legal stability. For example, assets operating on a public blockchain can be redeemed within 24 hours using JPMD as a payment tool. Compared to the need for a separate “withdrawal” path to convert stablecoins into fiat currency, JPMD supports instant conversion into cash. In addition, JPMD also provides deposit protection and interest income potential, thereby enhancing the on chain asset management ecosystem.

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JPMorgan Chase launched a deposit token in response to the capital flow and new income structure surrounding stablecoins. For example, Tether generates approximately $13 billion in revenue annually, while Circle also earns billions of dollars by managing safe assets such as US government bonds. The income model of these stablecoins is different from the traditional loan deposit spread, but generates a similar return structure through customer funds.

Of course, JPMD also has limitations. Its design fully complies with the existing financial regulatory framework, making it difficult to achieve complete decentralization and openness of blockchain. At present, this service is only available to institutional clients. Nevertheless, JPMD provides a practical strategy for traditional financial institutions to enter public blockchain based financial services while maintaining stability and compliance. Many industry observers believe that JPMD represents the ongoing evolution of structural connections between traditional finance and on chain ecosystems.

Circle: Building native finance on blockchain
Circle has become a key player in the on chain finance sector through its stablecoin USDC. The USDC is 1:1 linked to the US dollar, and the reserve consists of cash and short-term US treasury bond bonds. The technological advantages of USDC include low cost and instant settlement, which many companies use as a practical alternative for enterprise payments and cross-border remittances. USDC supports 24-hour real-time fund transfer without the complex procedures of traditional SWIFT networks, helping businesses overcome the limitations of traditional financial infrastructure.

However, Circle’s current business structure has some limitations. BNY Mellon serves as the reserve custodian of USDC, while BlackRock is responsible for asset operation and management. This structure outsources core functions to external organizations. Although Circle can generate interest income, its direct control over assets is limited. In addition, its current income model is highly dependent on a high interest rate environment. To achieve long-term sustainability and revenue diversification, Circle needs more independent financial infrastructure and stronger operational authority. To address these limitations, Circle applied to the Office of the Superintendent of the Currency (OCC) in June 2025 to establish a National Trust Bank. This measure is not only a compliance effort, but also a transformation strategy. Many industry observers believe that this marks Circle’s transformation from a simple stablecoin issuer to a comprehensive financial institution. The identity of a trust bank will enable Circle to directly manage reserve custody and asset operations, thereby strengthening internal controls over its own financial infrastructure and expanding digital asset custody services for institutional investors. Circle originated as a native encryption company, but is now adjusting its strategy to build sustainable operations within the existing institutional framework. This involves trade-offs such as reduced flexibility and increased regulatory burden. The scope of authority obtained in the future will depend on policy developments and regulatory interpretations. Nevertheless, this measure marks a crucial milestone in how on chain financial structures can grow and adapt within the existing institutional framework.

Who will lead on chain finance?
Participants from different backgrounds are actively entering the on chain financial ecosystem, ranging from traditional financial institutions such as JPMorgan Chase to native crypto companies such as Circle. This phenomenon reminds people of the competitive landscape of the fintech industry in the past. At that time, technology companies entered the financial sector by internalizing core functions such as payments and remittances, while traditional financial institutions expanded user touchpoints and improved operational efficiency through digital transformation.

The key is that this competition is not simply parallel, but breaks the boundary between the two. Similar phenomena are now reproducing in the field of on chain finance. For example, Circle applies to establish a trust bank to directly handle core functions such as reserve management and asset custody. JPMorgan Chase, on the other hand, issues deposit tokens on the public blockchain, expanding into the field of on chain asset management. The two started from different directions, but gradually absorbed each other’s strategies and business areas, trying to find a new balance point.

This trend brings new opportunities, but also comes with risks. If traditional financial institutions are eager to imitate the agility and speed of technology companies, they may conflict with existing risk control systems. For example, Deutsche Bank promoted a “digital first” strategy and made large-scale IT investments, but system errors caused by conflicts with old infrastructure resulted in billions of dollars in losses.

On the contrary, native encryption companies face different risks. They may sacrifice flexibility and execution capabilities due to excessive pursuit of institutional acceptance – these have always been their main competitive advantages.

The success of on chain financial competition ultimately depends on a profound understanding of one’s own foundation and unique advantages. Enterprises must develop strategies based on their ‘asymmetric advantages’ and coordinate the integration of technology and institutional frameworks on this basis. Whether these two factors can be balanced will determine who can become the ultimate winner.