JPMorgan CFO: Yield-generating stablecoins may create a "dangerous parallel banking system"

JPMorgan Chase CFO Jeremy Barnum stated during the company's fourth-quarter earnings call that while JPMorgan supports blockchain technology and financial innovation, it holds a clear wary attitude towards the design of certain yield-generating stablecoins, believing they could potentially replicate traditional banking functions in the absence of appropriate prudential regulation, thus creating a "dangerous and unwelcome parallel banking system." Barnum pointed out that the bank's position aligns with the regulatory intent set forth in the GENIUS Act, which aims to establish clear boundaries for stablecoin issuance. He emphasized that if stablecoins possess characteristics similar to "interest-bearing deposits" but do not bear the capital, risk control, and compliance requirements gradually developed over centuries of banking regulation, they will pose a risk to the existing regulated financial system. While JPMorgan welcomes competition and innovation, it does not support "shadow" banking structures that circumvent existing regulatory frameworks. At the legislative level, the issue of stablecoin "yields" has become one of the core points of contention in the US Congress's review of the Digital Asset Markets Clarity Act. The latest draft amendment shows that legislators are inclined to prohibit digital asset service providers from paying users interest or returns solely for holding stablecoins, in order to avoid their function being equated with bank deposits; at the same time, the draft still reserves space for incentive mechanisms related to network activities such as liquidity provision, governance participation, and staking. (Cointelegraph)