JPMorgan Chase's Chief Financial Officer, Jeremy Barnum, has voiced concerns regarding yield-bearing stablecoins, cautioning against the potential risks they pose to the traditional banking system. During the bank's fourth-quarter earnings call on January 13, 2026, Barnum labeled stablecoin yield as "obviously dangerous and undesirable," arguing that these instruments could create a parallel banking system lacking the prudential safeguards that have been developed over centuries of bank regulation.
Barnum's remarks come amidst ongoing discussions in the U.S. Senate Banking Committee regarding cryptocurrency market structure legislation. A key point of contention is whether crypto firms should be allowed to offer yield rewards on stablecoin deposits, similar to interest payments offered by traditional banks. The Digital Asset Market Clarity Act is a comprehensive proposal aimed at clarifying regulations for digital assets, but rewards from stablecoins have become a contentious part of the debate. The Act seeks to prohibit stablecoin issuers from distributing yield to passive token holders, but does allow rewards tied to actions, such as account opening incentives and cashback rewards.
The concern, echoed by the American Bankers Association (ABA), is that yield-bearing stablecoins could draw funds away from regulated banks, potentially weakening their ability to extend loans to households and businesses. The ABA has cautioned that if consumers can earn returns on dollar-pegged tokens outside the regulated banking sector, deposits could migrate rapidly, especially during periods of financial stress. Such outflows could reduce banks' capacity to fund mortgages, small-business loans, and consumer credit, with knock-on effects for economic growth. The ABA estimates that as much as $6.6 trillion in bank deposits could be at risk if these practices continue. Community bank leaders are urging U.S. senators to close what they describe as dangerous loopholes in stablecoin legislation, warning that trillions of dollars could migrate out of traditional bank deposits and undermine local lending across the country.
JPMorgan, however, has taken a somewhat more measured stance. While acknowledging the potential for stablecoins to change the mechanics of payments, the bank has argued that they do not currently threaten banks' role in credit intermediation or financial stability. A JPMorgan spokesperson told CoinDesk that there will be different, but complementary, use cases for deposit tokens, stablecoins and all the other forms of payments. This perspective aligns with a view held by several large financial institutions that see stablecoins as an extension of existing payment technologies rather than a replacement for banks.
Despite JPMorgan's downplaying of the systemic threat, Barnum emphasized the need to prevent the creation of a parallel banking system that functions like banking but without the prudential safeguards. He questioned whether stablecoins actually improve the consumer experience, despite their "cool" technology. Regulators express growing concerns about algorithmic stablecoins and high-yield lending programs. The 2022 collapse of TerraUSD (UST) demonstrated the systemic risks associated with unsustainable yield models. The Digital Asset Market Clarity Act includes stricter limitations on stablecoin yields, directly addressing concerns about consumer protection and financial stability in the rapidly evolving crypto sector. By linking rewards to real economic actions, regulators hope to prevent the kind of reflexive, Ponzi-like dynamics that have troubled the sector.
