JPMorgan's blog post argues digital assets must follow traditional finance rules and warns stablecoins should not evade banking safeguards, as the Senate races to pass the Clarity Act before the August recess.
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JPMorgan threw its weight behind U.S. crypto market structure legislation Monday. The bank's blog post from two senior executives spent as much space on potential pitfalls as on the upside.
Umar Farooq, global co-head of JP Morgan Payments, and Peter Muriungi, CEO of Digital Assets and Blockchain Solutions, argued that digital assets should not bypass the safeguards governing traditional finance. Assets functioning like securities must follow securities law regardless of the blockchain, they wrote. Decentralized platforms that act as exchanges or brokers should meet the same disclosure and customer-protection standards.
Tokenization and programmable money could speed payments and reduce settlement times, the executives acknowledged. Those benefits will only materialize if lawmakers pair regulatory clarity with strong protections, they said.
Farooq and Muriungi published the blog post as the Senate races to advance the Digital Asset Market Clarity Act before the August recess. The bill cleared the Senate Banking Committee. Negotiators still face unresolved issues: ethics rules for senior officials with crypto ties, liability protections for decentralized finance developers, and stablecoin yield provisions. Senate Agriculture Committee Democrats have raised concerns.
JPMorgan devoted considerable attention to stablecoins. Products resembling bank deposits must not operate outside capital, liquidity, and consumer protection rules, the executives warned. Features such as rewards or cashback for holding stablecoin balances could lead consumers to assume protections that do not exist, increasing the risk of rapid withdrawals during market stress.
The warning aligns with CEO Jamie Dimon's attacks on stablecoin yield. Dimon told reporters earlier this month that banks will not accept the current language. He pledged to fight the issue "down to the wire." Lawmakers rejected an outright ban during Clarity Act negotiations. Banks continue lobbying for tighter restrictions.
JPMorgan also argued that digital asset legislation should preserve anti-money laundering and law enforcement tools. Broad exemptions for parts of the crypto ecosystem could create blind spots for illicit finance and market manipulation, the executives wrote.
Industry groups remain optimistic the legislation can reach the Senate floor in July. Analysts have warned that failing to pass before the August recess would sharply reduce its chances of becoming law this year.
A House panel has scheduled a field hearing on the Clarity Act, adding another forum for the stablecoin yield debate. Senate leadership has not yet scheduled floor time for the bill.
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