JPMorgan Chase CFO Jeremy Barnum warned on that yield-bearing stablecoins could “create a dangerous parallel banking system,” arguing they replicate deposit-like behavior without the prudential safeguards banks must carry.
The point lands because yield-bearing products are still a minority of stablecoins today, but they are scaling quickly enough to matter for deposits, liquidity, and financial intermediation.
Why JPMorgan sees a systemic-risk setup
Barnum’s core argument is that stablecoins paying passive income can look and feel like deposits while operating outside the banking perimeter. In his framing, the problem is not only market volatility—it’s the absence of bank-style protections.
He anchored that risk view in two projections highlighted in the briefing: yield-bearing stablecoins are around 6% of the stablecoin market today but could grow to as much as 50%, while the overall stablecoin market is projected to expand from roughly $300 billion to $2 trillion by 2028. Those numbers are being used to support a scalability argument: if “deposit-like” crypto liabilities become large enough, stress events could create run dynamics without the usual capital and liquidity shock absorbers.
Yield in these structures is typically sourced from DeFi lending, staking rewards, or backing tied to tokenized real-world assets such as short-term U.S. Treasuries, and the headline returns cited have ranged roughly 2%–9% depending on the design and exposures. Products referenced in the same context included Ethena’s USDe, Ondo Finance’s USDY, and protocol-linked offerings from Pendle Finance and Aave’s GHO.
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Where the operational gaps show up
JPMorgan’s critique narrowed to three missing guardrails: no standardized capital requirements, no mandated liquidity rules to manage run risk, and limited supervisory oversight. In practical terms, Barnum’s concern is that these gaps amplify the probability and severity of stress outcomes—de-pegging risk, smart-contract losses, and rapid outflows that can cascade through on-chain liquidity venues—and that deposit diversion could create second-order effects for regulated finance.
Barnum’s bottom line was blunt: “Creating financial products that function like bank deposits yet avoid capital requirements, liquidity standards and consumer protections is dangerous and undesirable.”
Regulation is already pushing the market in different directions
The regulatory backdrop is not static. The GENIUS Act, enacted July 24, 2025, created a U.S. framework for payment stablecoins and prohibits issuers from paying interest to holders. JPMorgan’s view is that this restriction may reduce direct competition with bank deposits, but it could also push yield demand toward less-regulated market segments rather than eliminating it.
JPMorgan has been promoting a contrasted model: a bank-issued deposit token (JPMD) that it piloted on Coinbase’s Base network, with plans referenced for Canton Network integration. The positioning is deliberate—24/7 settlement benefits, but inside a regulated perimeter—as an alternative to yield-bearing stablecoins that operate outside prudential standards.
If yield products attract balances, liquidity can move faster, settlement windows compress, and run dynamics can become more reflexive. For product and compliance teams, expect more scrutiny on token economics, reserve practices, and how yield is generated and disclosed, especially where products resemble deposits in user experience.
Investors are likely to keep benchmarking two variables: the projected expansion toward $2 trillion by 2028 and how strictly the GENIUS Act’s interest prohibition is enforced. That combination will effectively test whether regulated tokenized deposits can absorb demand—or whether unregulated yield-bearing stablecoins continue to pull capital and expand systemic exposure.
