Tokenized Bank Deposits Coins Are Not GENIUS Act Compliant Stablecoins—Here’s Why

As digital finance matures, not all “digital dollars” are created equal. Case in point: JPMorgan’s new deposit token (JPMD) and the regulated stablecoins emerging under the GENIUS Act may look similar on the surface—but they are fundamentally different in structure, purpose, and legal treatment. Understanding this distinction is critical for fintech operators, especially those navigating the future of payments, compliance, and digital asset innovation.

1. Who Can Issue It

JPMD is issued by a regulated bank—JPMorgan Chase. It’s a tokenized form of a traditional bank deposit, and only a licensed bank can issue it. On the other hand, the GENIUS Act was designed to create a new framework for non-bank entities—fintechs, state-chartered institutions, and other approved issuers—to launch compliant, fully reserved stablecoins. The law also allows banks to participate, but only through separately regulated subsidiaries or under a special license. This opens the door for a broader range of players to enter the stablecoin market under clearly defined rules.

2. How It's Backed

The JPMD deposit token is backed by deposits held at JPMorgan—just like any other checking or savings account. These deposits are part of a fractional reserve system, meaning the bank may lend or invest a portion of them. Even if JPMorgan maintains strong reserves, the backing ultimately rests on the bank’s balance sheet and creditworthiness.

In contrast, a GENIUS-compliant stablecoin must be fully backed 1:1 by segregated, high-quality liquid assets such as cash or U.S. Treasury bills, held in custody for the benefit of token holders. These assets must remain separate from the issuer’s operating capital and cannot be lent out. The value of the stablecoin is tied directly to the quality and transparency of its underlying reserves, not the financial health of the issuer.

3. Legal Status and Protections

Legally, JPMD is a bank deposit in tokenized form. It’s treated just like any other liability on the bank’s books and may be eligible for deposit insurance. Users holding JPMD are essentially depositors, with all the rights and protections that status confers under traditional banking laws.

GENIUS Act stablecoins, however, are defined as a new class of digital payment instruments. They are not considered deposits and therefore do not carry FDIC insurance. Instead, they offer other protections: reserve asset segregation, strict redemption rights, and regulatory clarity. GENIUS issuers are also prohibited from paying interest on stablecoin balances, distinguishing these tokens from bank deposits or money market instruments.

4. Regulatory Oversight

JPMD lives entirely within the traditional banking system and is overseen by existing bank regulators. Its issuance, custody, and redemption all operate under longstanding rules governing banks and their customers.

Stablecoins under the GENIUS Act fall into a new regulatory category. Issuers must obtain a federal or state stablecoin license and comply with strict operational, risk management, and transparency requirements. These include reserve disclosures, audits, and the technical ability to freeze assets in response to law enforcement requests. In short, GENIUS creates a parallel regulatory track specifically tailored to the unique risks and use cases of stablecoins.

Why It Matters

Both JPMD and GENIUS Act stablecoins aim to move dollars onto blockchain rails, but the similarities stop there. JPMD is a digital extension of the traditional deposit system, optimized for institutional use and backed by a single bank. GENIUS Act stablecoins are designed as a public-regulated alternative to bank money, open to both private-sector innovators and state entities looking to issue digital dollars within a clear legal framework.

As the market for tokenized dollars grows, it’s important to recognize that not all “bank coins” are true stablecoins under U.S. law. For fintech builders and policy architects, understanding this line isn't just semantic — it's foundational to shaping what comes next.