Jeremy Barnum, chief financial officer of JPMorgan Chase, said stablecoins could evolve into a form of regulatory arbitrage if the new rules fail to bring them in line with traditional banking standards.
Speaking on the bank’s first-quarter earnings conference call Tuesday, Barnum framed the debate less as a technological shift and more as a question of oversight. Some stablecoin models could replicate bank-like products while avoiding safeguards applied to deposits, including rules around interest payments and customer protections, he said.
“If the same product is not regulated in the same way, you open the door to arbitrage,” Barnum said, pointing to structures that offer rewards resembling yield. In this scenario, he added, companies could “run a bank” without being subject to core banking regulations.
The comments come as lawmakers consider new frameworks for digital assets. The Clarity Act bill aims to define how crypto markets are divided between regulators such as the Securities and Exchange Commission and the Commodity Futures Trading Commission. It also reflects broader efforts to establish clearer rules for stablecoins and related products.
The debate also extends to whether issuers of stablecoins, cryptographic tokens whose value is tied to a traditional asset, primarily the dollar, should be allowed to offer a return to users.
Some crypto companies, including Coinbase (COIN), have pushed for the ability to pass on interest earned on reserve assets to coin holders, arguing that this would make stablecoins more useful as savings tools.
Banks have responded, saying yield stablecoins are starting to resemble deposits without the same capital, liquidity and consumer protection requirements. They say this creates an uneven playing field, allowing non-bank firms to attract funds by offering returns that regulated banks are unable to provide.
The issue has become a central point of tension in Washington DC, as policymakers consider how to prevent stablecoins from operating as bank-like products outside the traditional regulatory perimeter.
Barnum said JPMorgan supports the push for clarity, but stressed that consistency matters more than speed. Without it, he warned, new entrants could gain an advantage by operating outside existing regulatory boundaries.
He downplayed the idea that stablecoins would disrupt the bank’s core payments business. JPMorgan already runs a large wholesale payments network that processes transactions at low cost and high speed, leaving little room for margin-related disruptions.
Instead, the bank is integrating similar technology into its own systems. Through its blockchain unit, Kinexys, JPMorgan has developed tools such as JPM Coin and tokenized deposits, which allow institutional clients to move money around the clock and automate transactions.
Barnum described these efforts as part of a broader modernization strategy. Features often associated with stablecoins, such as programmable payments, are already built into existing infrastructure rather than replacing it.
On the consumer side, he said stablecoins are often presented as “digital currency” but still face familiar compliance hurdles, including identity checks.
JPMorgan reported better-than-expected first-quarter results, driven by a rebound in trading and investment banking activities. Net profit rose 13% year-over-year to $16.49 billion, while revenue climbed 10% to $50.54 billion. The bank set aside less than expected for potential loan losses, indicating stable credit conditions among borrowers.
