Something huge just shifted in digital money and most crypto holders are still trading memes while the real disruption moves quietly on chain. JPMorgan just brought its $10 trillion per day payments machine into the same arena as USDC and USDT, but under rules that let it do 1 thing the stablecoin giants legally cannot: share the yield. This is not another altcoin narrative. This is the start of a structural fight over who gets to earn interest on trillions of tokenized dollars and who gets left holding non yielding bags.
JPM Coin, branded as JPMD on Coinbase’s Base network, is not a classic stablecoin. It is a tokenized bank deposit that sits directly on JPMorgan’s balance sheet as a claim on real bank money, and it can pay you normal bank interest while it sits in an approved wallet. JPMorgan describes JPMD as a USD deposit token for institutional clients that represents actual deposits and supports near instant transfers on Base 24/7. Deposits in JPMD earn interest the same way a regular institutional account would, with the twist that now those balances move across a public L2 instead of through closed bank rails. The crucial point is legal status: this is deposit money, not a money market style stablecoin, so interest to holders is expected, not forbidden.
Circle and Tether are stuck in a different legal box. USDC is structured as a fully reserved stablecoin, with Circle holding almost all reserves in cash and short term Treasuries and keeping the yield on those reserves as its primary business model. In Q3, Circle generated about $740 million in revenue and reserve income, with roughly 96% of that coming from interest on the Treasuries and cash that back USDC rather than from fees or subscriptions. That income flows to Circle’s bottom line because stablecoin frameworks and their own disclosures commit them to 1:1 redeemability and full collateralization, not to passing through interest to token holders. Tether’s model is similar: high yield on reserves, no yield for you.
That setup worked as long as banks were clumsy, regulators were hostile and tokenized dollars lived mostly outside the regulated core. Now the board has flipped. JPMorgan has turned JPMD into a bridge from its internal ledger to Base, effectively treating a public blockchain as an extension of its global cash management franchise. The bank processes about $10 trillion in traditional payments every day, and even a small fraction of that moving as tokenized deposits instantly creates a liquidity ocean that no standalone stablecoin issuer can match. Because these are regulated deposits, JPMorgan can legally offer rates like 4% on tokenized balances, while Circle and Tether cannot write “we will pay you 4% on USDC or USDT” without detonating their regulatory status.
This is where the “second stablecoin war” really begins. The first war pitted USDC against USDT in a race for mindshare, liquidity and integrations. Both sides played the same game: promise 1:1 backing, keep the yield from Treasuries, and fight on transparency, exchange listings and ecosystem deals. The new war is different. It is banks versus stablecoin issuers, with asymmetric weapons. Banks can tokenize insured deposits, plug directly into DeFi rails through permissioned wallets, and legally share the interest stream with customers. Stablecoins are locked into a non interest bearing structure where all that yield accrues to the issuer, not the holder.
Regulators are helping to tilt the field. New US rules created clear categories for “stablecoins” versus “deposit tokens” and encouraged highly regulated banks to issue tokenized money instead of letting non bank issuers dominate dollar rails. JPMorgan’s own white papers argue that bank issued deposit tokens are safer than independent stablecoins because they come with existing prudential oversight and, in many cases, deposit insurance. Once those same banks are allowed to pay competitive yields on tokenized balances, they can undercut Circle’s and Tether’s silent tax on users, where every $1 of stablecoin you hold is a free loan that lets the issuer keep the interest.
Circle’s financials show exactly what is at stake. When 96% of revenue comes from interest on reserves, any move that forces them to share that interest with users or compete with yield bearing bank tokens directly attacks the core economics of the business. A world where major banks offer 4% on tokenized deposits on public chains is a world where holding non yielding USDC or USDT starts to look like leaving rewards unclaimed. For trading firms, treasurers and DeFi protocols, the rational move is obvious: migrate collateral and settlement balances toward instruments that pay, provided they can still plug into the same on chain infrastructure.
The legal line is brutal in its simplicity: only 1 side can share the revenue. Bank issued deposit tokens like JPMD can pay interest as normal deposits while living on a public blockchain. Classical stablecoins like USDC and USDT are designed to be fully collateralized, non interest bearing claims whose issuers sit on the yield. That means the “second war” is not about branding or chain choice, it is about whether the future of on chain dollars belongs to highly regulated institutions that are finally stepping into crypto’s backyard or to the crypto native issuers that built the first generation of digital dollars but now cannot legally match the new offer. If banks win and absorb the yield business at scale, Circle and Tether do not just lose market share. They lose the economic engine that made stablecoins such a profitable corner of crypto in the first place.
Originally published at https://coinbasecorridor.blogspot.com on December 16, 2025.
Banks Just Declared War On Stablecoins And Crypto Has No Idea What Is Coming was originally published in Coinmonks on Medium, where people are continuing the conversation by highlighting and responding to this story.