Stablecoins took center stage during JPMorgan Chase’s fourth-quarter earnings call this week, as executives voiced support for blockchain innovation while drawing a firm line against stablecoin designs that mirror traditional bank deposits.
Key Takeaways:
JPMorgan backs blockchain innovation but warns yield-bearing stablecoins mimic bank deposits without oversight. The bank says interest-paying stablecoins could create a parallel, lightly regulated banking system. Adding yield may accelerate stablecoin adoption while increasing risks to bank funding and stability.The discussion was prompted by a question from Evercore analyst Glenn Schorr, who asked how the bank views stablecoins amid renewed lobbying from the American Bankers Association and active congressional negotiations over digital asset legislation.
JPMorgan chief financial officer Jeremy Barnum said the bank’s position is broadly aligned with the goals of the GENIUS Act, which aims to establish clear rules for stablecoin issuance and oversight.
Yield-Bearing Stablecoins Mimic Bank Deposits
Barnum claimed interest-bearing stablecoins risk recreating core banking functions without the regulatory framework that underpins the financial system.
He warned that tokens offering yield simply for being held could function like deposits while avoiding capital requirements, liquidity rules and supervisory scrutiny.
“The creation of a parallel banking system that sort of has all the features of banking, including something that looks a lot like a deposit that pays interest, without the associated prudential safeguards that have been developed over hundreds of years of bank regulation, is an obviously dangerous and undesirable thing,” Barnum said.
While emphasizing that JPMorgan is open to competition and technological progress, Barnum stressed that innovation should not come at the expense of financial stability.
In his view, stablecoins designed to generate passive yield blur the line between payment instruments and deposit substitutes, raising systemic risks if left unchecked.
The banking industry’s unease is not new. Last year, industry representatives described the rise of yield-bearing stablecoins as a direct threat to banks’ funding models, particularly as traditional lenders continue to offer relatively low interest rates on deposits.
Stablecoins have already gained traction as tools for cross-border payments, onchain settlement and dollar access, largely due to their speed and lower transaction costs.
Adding yield to those products could accelerate adoption and intensify competition for deposits.
Lawmakers Move to Ban Interest on Stablecoin Holdings
That prospect is now drawing closer scrutiny on Capitol Hill. Stablecoin rewards have become a flashpoint in lawmakers’ debate over the Digital Asset Market Clarity Act, a broad proposal designed to define regulatory responsibilities across the crypto sector.
An amended draft released this week would prohibit digital asset service providers from paying interest or yield “solely in connection with the holding of a stablecoin,” signaling lawmakers’ intent to prevent stablecoins from operating like bank accounts.
At the same time, the draft leaves room for incentive models tied to active participation in blockchain ecosystems, such as liquidity provision, governance involvement or staking.
The distinction suggests policymakers are attempting to balance innovation with safeguards, allowing crypto networks to reward engagement while blocking stablecoins from becoming de facto, lightly regulated deposits.
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