Jeremy Barnum, chief financial officer at JPMorgan Chase, said stablecoins may evolve into a form of regulatory arbitrage if new rules do not align them with traditional banking standards.
Speaking on the bank’s first-quarter earnings conference call Tuesday, Barnum framed the debate less as a technological change and more as a supervisory issue. Some stablecoin models could replicate bank-like products while avoiding safeguards applied to deposits, including rules on interest payments and customer protection, he said.
“If the same product is not regulated in the same way, it opens the door to arbitrage,” Barnum said, pointing to structures that offer similar performance rewards. In that scenario, he added, companies could “run a bank” without being subject to basic banking regulations.
The comments come as lawmakers weigh new frameworks for digital assets. The proposed Clarity Act 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 pegged to a traditional asset, primarily the dollar, should be allowed to offer yield to users.
Some crypto companies, including Coinbase (COIN), have pushed for interest earned on reserve assets to be transferred to coin holders, arguing that this would make stablecoins more useful as savings tools.
Banks have responded, saying that yielding stablecoins are starting to look like deposits without the same capital, liquidity and consumer protection requirements. In his view, that creates an uneven playing field, allowing non-bank companies to attract funds by offering returns that regulated banks cannot offer.
The issue has become a central point of tension in Washington, DC, as policymakers weigh how to prevent stablecoins from operating as bank-like products outside the traditional regulatory perimeter.
Barnum said JPMorgan supports the quest for clarity, but emphasized 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 will disrupt the bank’s core payments business. JPMorgan already operates a large wholesale payments network that processes transactions at low cost and high speed, leaving little room for margin-driven 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 24 hours a day 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 being built into existing infrastructure rather than replacing it.
On the consumer side, he said stablecoins are often framed as “digital cash,” but still face familiar compliance hurdles, including identity checks.
JPMorgan reported better-than-expected first-quarter results, driven by a rebound in commercial and investment banking. Net income increased 13% year over year to $16.49 billion, while revenue increased 10% to $50.54 billion. The bank set aside less than expected for potential credit losses, indicating stable credit conditions among borrowers.
