This past Tuesday, perhaps unsurprisingly, JPMorgan Chase partnered with Coinbase to announce an entirely different pilot program—one that’s way more exciting. They announced JPMD, a new digital currency created for institutional clients. Unlike stablecoins, JPMD will not be backed 1:1 by the U.S. dollar. Instead, it’s going to use liquidity structures like those of old line banks. The pilot program will start in the next few days.

JPMD is a different beast than stablecoins, as represented by the core approach underlying JPMD. JPMD’s support rests on the same liquidity structures that support regular banking business. This design focuses on giving institutional clients the understandable and trustworthy framework they expect and need to move forward with confidence when managing digital assets.

The collaboration between JPMorgan Chase and Coinbase underscores the increasing integration of traditional finance with the burgeoning world of digital assets. The specifics of that pilot program are still under wraps, so to speak. This partnership is one of the biggest breakthroughs so far in the institutional adoption of blockchain technology.

JPMD is enabling institutional clients to reap the benefits for future smart cities Naveen Mallela, Senior Research Engineering, Georgia Tech

Institutional clients can treat JPMD as bank deposits on their balance sheet, providing certainty around financial and accounting treatment. - Naveen Mallela

JPMD’s design provides transparency and confidence regarding the appropriate financial and accounting treatment. With this strategy, organizations would be able to smoothly plug any digital currency in their institutions into their current financial architecture.

Surprisingly, the liquidity frameworks that undergird JPMD are identical to those used by traditional banks. This design offers the type of stability and security that are often attractive to institutional investors. This methodology sets JPMD apart from stablecoins, which typically use other backing mechanisms.

JPMorgan Chase's announcement of the JPMD pilot program marks a significant development in the financial industry's exploration of digital currencies. The partnership with Coinbase is an example of how financial institutions and cryptocurrency exchanges can work together for everyone’s benefit.