Once again Yuval resorts to personal attacks on me without fully engaging on a complicated topic. (He also has some weird fetish about mine being a teacher, but that's his business).

So let me elaborate my critique of the utility of tokenized bank deposits like JPMD in simple language that hopefully he can understand.

The biggest difference between the liability of a fractionally-reserved bank and that of a narrow bank (aka stablecoin issuer) is run risk. Levered banks live under constant threat of runs, narrow banks don't.

Due to run risk, a tokenized deposit can never be a bearer instrument. The bank must know who every token holder is at all times to manage the FDIC (or foreign equivalent) insurance limit. Otherwise a single customer could put $1m into 4 wallets and quadruple their insurance, thus Sybil Attacking the FDIC.

Also due to run risk, tokenized deposits cannot be allowed to trade freely in the secondary market. Stablecoins like USDT and USDC have micro-depegs all the time due to liquidity, but nobody cares because they are fully reserved. A tokenized deposit having even the slightest depeg could cause a run on the entire bank.

Run risk is why bank deposits have opt-in ownership (everyone must be KYC'ed) but stablecoins have opt-out (almost nobody does, unless there is a law enforcement action).

And BTW, every single senior bank exec (including at JPM) and bank regulator I've ever discussed this issue with agrees with my logic. The concept of a tokenized deposit moving as freely as a stablecoin is terrifying.

This is also why stablecoin issuers have gone out of their way to promote their liability for agentic use while banks have outright banned it.

Yuval's point about "stablecoin issuers also holding deposits" is irrelevant since they are fully reserved.

He also seems to imply the law will change to force stablecoins issuers to also have to KYC every holder. Genius doesn't touch this, nor does any regulator I know. This change would destroy stablecoin utility.

Now, knowing all of this, why do I think products like JPMD are mostly innovation theater? Because you literally can't do anything with them you couldn't also do with an API and 30 year old database tech inside JPM.

You can't use JPMD in DeFi unless you are only trading with other JPM customers and only against other assets directly on JPM's balance sheet. Why you'd want to pay Ethereum gas fees and deal with 12 second slot times to do the same thing the bank can handle instantly for free is beyond me.

Also, any swap of JPMD against a different asset (say ETH) runs the risk of JPM refusing to honor the deposit swap leg of the transaction. This swap isn't atomic and has high settlement risk.

Can stablecoin issuers also do this and interfere in DeFi? Yes, but they go out of their way not to, because having their coins featured in DeFi is great for business - unlike for banks.

Also, stable issuers don't know who 99% of token holders are, so have no basis to interfering. Banks know who every depositor is and have a long history of censoring, including against the crypto industry.

I'm guessing the reason Yuval is upset about my post is because JPMD is soon coming to Canton. That deployment actually makes sense. They should definitely do it.

Canton is just a database with a button. JPMD is an asset with a button. Both feature a single entity, possibly a single person, who can endogenously void holder rights at any time. Thus both have infinite settlement risk.

Infinity multiplied by infinity is still infinity.

Simple math that even a non-academic could understand.