JPMorgan execs draw comparison between yield stablecoins and 'shadow banking'

JPMorgan executives are not backing down on the belief that yield-bearing stablecoins should not be permitted in the U.S. via wide-ranging crypto market structure legislation under discussion in Congress.

On Monday, Global co-Head of JP Morgan Payments Umar Farooq and CEO of Digital Assets and Blockchain Solutions Peter Muriungi published a note calling for a comprehensive framework for digital assets in the United States without naming the Clarity Act directly.

"Getting the framework right will enable responsible innovation by closing loopholes, aligning oversight with economic reality, and preserving the protections that underpin financial stability," Farooq and Muriungi wrote.

The Clarity Act has become shorthand for the legislative efforts to establish a comprehensive regulatory framework for crypto by clarifying jurisdiction between the Commodity Futures Trading Commission and the Securities and Exchange Commission, while also setting rules for market participants, consumer protections, and market integrity.

This has become increasingly important as U.S. institutions continue to expand into tokenization. In their post, Farooq and Muriungi note that "tokenization and programmable money" offer key innovations for global payments and instant, 24/7 settlement.

"These technologies have the potential to modernize financial infrastructure in meaningful ways, particularly as commerce and investments become more global and operate around the clock," they wrote.

Division over yield-bearing stablecoins

However, a divide over yield-bearing stablecoins has emerged, with many banks and banking industry representatives calling for prohibitions. JPMorgan CEO Jamie Dimon has been an especially vocal critic of the crypto industry’s attempt to legislate stablecoin rewards.

Banks have largely embraced so-called payment stablecoins, or fiat-pegged tokens backed by cash and cash equivalents, as established under the GENIUS Act stablecoin framework passed into law last summer, but have argued yield bearing stablecoins could threaten bank lending by shrinking bank deposits.

"When consumers are offered ‘rewards’ or ‘cashback’ simply for holding balances, many reasonably assume the product carries familiar safeguards," Farooq and Muriungi wrote. "If it does not, the result is not just consumer confusion; it is heightened run risk and the potential for destabilizing shifts of funds during periods of stress."

The authors further noted that yield stablecoins may drift into "shadow banking" and that stablecoins should follow the "supervision standards that accompany traditional deposit products."

"Equally important is ensuring that digital asset markets do not become blind spots for illicit activity. As these technologies become faster and more integrated into mainstream finance, strong anti money laundering and law enforcement tools are not optional—they are foundational," Farooq and Muriungi said. 

Could Clarity hinder crypto crime investigations?

Last week, four U.S. law enforcement organizations sent a joint letter to the Department of Justice and the White House arguing the Clarity Act has gaps that could make it harder to investigate and prosecute illicit crypto activity.

Perhaps most succinctly, Farooq and Muriungi noted that “responsible innovation is already possible within existing guardrails,” essentially arguing that digital assets should largely follow the securities and banking rules already in place.

The Clarity Act reportedly ranks high on the Senate's July agenda, as legislators work to advance the bill even as other defense, housing, and immigration concerns loom. Last week, Galaxy Research cut its estimate of the odds that the Clarity Act will pass in 2026 to 50%, down from 60% earlier this month, citing timing and Senate calendar constraints.