JPMorgan CFO: Yield-bearing stablecoins could create a "dangerous parallel banking system"

JPMorgan Chase's Chief Financial Officer Jeremy Barnum stated during the company's fourth-quarter earnings call that JPMorgan supports blockchain technology and financial innovation, but holds a clear cautious attitude towards the design of certain yield-bearing stablecoins, believing they could replicate traditional banking functions in the absence of appropriate prudent regulation, thereby creating a "dangerous and unwelcome parallel banking system."

Barnum pointed out that the bank's stance aligns with the regulatory intent set forth by 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 adhere to the capital, risk control, and compliance requirements that have gradually developed over centuries of banking regulation, they would pose risks 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 divergences during the U.S. Congress's review of the "Digital Asset Market Structure Act."

The latest revised draft indicates that lawmakers are inclined to prohibit digital asset service providers from paying interest or yields to users solely for holding stablecoins, to avoid their functions being equivalent to bank deposits; at the same time, the draft still leaves room for incentive mechanisms related to liquidity provision, governance participation, staking, and other network activities.