JPMorgan Calls for Clear and Strict Crypto Rules, Warns About Stablecoin “Shadow Banking” Risk

JPMorgan said Monday it supports establishing a U.S. regulatory framework for digital assets, but the bank’s messaging placed at least as much emphasis on risk as opportunity.

JPMorgan payments chief Umar Farooq and CEO of the bank’s digital assets and blockchain unit Peter Muriungi said a clear crypto framework could help the industry mature, but only if it closes regulatory gaps rather than creating new ones.

This story is an excerpt from the Unchained Daily newsletter.

Farooq and Muriungi said the economic function of an asset should determine which rules apply not the technology it runs on.

Tokens that behave like securities should face the same disclosure, custody, and market-integrity obligations as traditional securities, Farooq and Muriungi said, adding that decentralized platforms performing broker- or exchange-like functions should be held to comparable standards.

Farooq and Muriungi further warned that payments innovation such as stablecoins could lead to “shadow banking” by offering yield-like incentives or balance-holding arrangements without the capital, liquidity, and consumer-protection standards that govern traditional deposits. They said that labeling a yield offering as “rewards” or “cashback” does not change its underlying run risk: consumers may assume protections exist that don’t, raising the danger of “destabilizing shifts of funds during periods of stress.”

Farooq and Muriungi’s remarks align with JPMorgan CEO Jamie Dimon’s criticism of the Clarity Act. Dimon has said that he would fight provisions supporting stablecoin yield.

Meanwhile, Farooq and Muriungi also urged Congress to preserve anti-money-laundering and law-enforcement tools, warning that broad exemptions for parts of the crypto ecosystem “can enable opaque operations that shield true ownership.” The remark comes as Section 604 of the Clarity Act, which advising developers from liability on how their applications are used has come under scrutiny from Catholic leaders and law enforcement groups.

The Senate is currently in a race to bring the Clarity Act to the floor before the August recess, with negotiators still working through stablecoin yield provisions, DeFi developer liability, and ethics rules for officials with crypto holdings.

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