Stablecoins emerged as a theme during JPMorgan Chase's fourth-quarter earnings call on Tuesday, with executives expressing support for blockchain technology while warning that certain stablecoin designs could threaten the regulated banking system.
The comments got here in response to an issue from Evercore analyst Glenn Schorr, who asked about stablecoins in light of the American Bankers Association's recent lobbying of the industry and ongoing congressional markups related to digital asset laws.
When asked, JPMorgan Chief Financial Officer Jeremy Barnum said the bank's position is consistent with the intent of the GENIUS Act, which goals to set guardrails for stablecoin issuance.
Barnum warned against using interest-bearing stablecoins that replicate traditional banking without proper oversight.
“Creating a parallel banking system that has all of the hallmarks of banking, including something that appears quite a bit like a deposit that pays interest, without the associated regulatory protections developed over a whole bunch of years of banking regulation, is patently dangerous and undesirable,” he said.
Source: Archie's Radar
Barnum added that while JPMorgan welcomes competition and innovation, it stays firmly against the emergence of a parallel banking system that operates outside established regulatory protections.
As Cointelegraph reported last May, the U.S. banking lobby sees high-yield stablecoins as a significant disruption to their business model, with one industry insider describing the response as a full-blown “panic.” The concern just isn’t unfounded.
Stablecoins have grown rapidly as a method of payment, on-chain settlement, and dollar access, offering faster transactions and lower costs. The prospect of high-yield versions only exacerbates the threat, especially as banks proceed to supply relatively modest rates of interest to depositors.
Stablecoin rewards are into consideration in Congress
Stablecoin rewards have emerged as a central point of contention in U.S. lawmakers' deliberations over the Digital Asset Market Clarity Act, a sweeping proposal aimed toward clarifying regulatory jurisdiction over digital assets and determining how crypto-related activities ought to be monitored.
Under an amended bill released this week, digital asset service providers could be prohibited from paying interest or earnings “solely in reference to holding a stablecoin,” signaling lawmakers’ intent to forestall stablecoins from functioning like bank deposits.
Source: US Senate Banking Committee
At the identical time, the draft leaves room for certain incentive structures which might be linked to broader ecosystem participation. These include rewards related to liquidity provision, governance activities, staking, and other network-related functions, slightly than the passive returns for holding a dollar-pegged token.
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