JPMorgan Warns of Shadow Banking Risk in Crypto Bill Push

JPMorgan urged Congress to pass clear digital asset legislation with robust safeguards. Without proper oversight, crypto innovation could create shadow-banking risks and undermine financial stability, the bank said Monday.

In a joint op-ed, Umar Farooq, global co-head of JPMorgan Payments, and Peter Muriungi, CEO of Digital Assets and Blockchain Solutions, argued that the United States has a genuine opportunity to lead in digital finance. Lawmakers must pair regulatory clarity with durable safeguards.

“Regulatory clarity matters only if paired with durable safeguards,” Farooq and Muriungi wrote. “Clarity with gaps or loopholes can push activity into lightly supervised channels and weaken long-standing protections.”

The op-ed focuses on what could go wrong rather than the promise of tokenization. The executives flagged that the blockchain on which a product is issued does not change its economic function. Assets that look and behave like securities should face disclosure, custody, and market integrity rules. Decentralized trading platforms that operate like brokers or exchanges should follow the same standards.

The bank reserved particular focus for stablecoins, where JPMorgan sees both commercial opportunity and competitive threat. Stablecoins and tokenized deposits could enable faster settlement and reduce friction in cross-border payments, Farooq and Muriungi wrote. When those products offer yield-like incentives or hold balances without meeting bank-level capital and liquidity standards, payments innovation becomes shadow banking by another name.

Features such as rewards or cashback on held balances lead many consumers to assume the product carries familiar protections. When it does not, the result is heightened run risk. This is a concentrated vulnerability that surfaces in the worst moments.

JPMorgan CEO Jamie Dimon has been among the banking industry's loudest voices on the issue. “The banks will not accept it,” Dimon said last month, vowing to fight stablecoin yield provisions in the Clarity Act “down to the wire.”

The op-ed arrived as the Senate races to advance the Digital Asset Market Clarity Act before its August recess. Negotiators are still working through stablecoin yield provisions and liability protections for decentralized finance developers.

The op-ed also pressed for strong anti-money laundering and law enforcement tools across the digital asset ecosystem. Broad exemptions for infrastructure that processes core transactions can enable opaque arrangements that shield true ownership, the executives argued – a risk for both national security and market integrity.

The op-ed did not arrive without commercial context. Also Monday, JPMorgan announced the expansion of its Kinexys blockchain payments platform to eight currencies. The addition includes the Australian dollar, Hong Kong dollar, Japanese yen, Chinese renminbi, and Singapore dollar. The system already supports the U.S. dollar, euro, and British pound.

The platform has processed more than $4 trillion in transactions to date. Average daily volume exceeds $7 billion. Payoneer and Japanese energy trader JERA Global Markets are among the first clients using the new currency accounts.

If the bill passes with stablecoin yield provisions without bank-level capital and liquidity requirements, JPMorgan and other banks may intensify their pushback. Dimon has already promised to fight “down to the wire.” Strong safeguards on stablecoin issuance, paired with a clear securities framework for tokenized assets, would reduce the risk of shadow banking and run dynamics, the bank argued.

The Senate returns July 13. The August recess deadline adds pressure on negotiators to resolve sticking points.

Earlier this week, Fidelity wrote that Bitcoin’s current crypto winter could end if one or more major catalysts emerge. These include the continuation of the four-year halving cycle, clearer crypto regulation, Federal Reserve rate cuts, a new breakout crypto use case, or a fresh wave of institutional adoption. The firm argued history suggests major bull markets have often followed similar shifts in supply dynamics, policy, macro conditions, and investor demand.