JPMorgan brushes off stablecoin fears as banks flag lending risks

JPMorgan Chase has played down claims that stablecoins pose a systemic threat to the banking sector, diverging from warnings issued by banking trade groups that argue the growth of yield-bearing digital tokens could drain deposits and undermine credit creation across the United States.

The debate intensified after the American Bankers Association sent a letter to the U. S. Senate cautioning that certain stablecoins, particularly those offering interest or rewards, could pull funds away from regulated banks and weaken their ability to extend loans to households and businesses. The association estimated that widespread adoption of such instruments could expose up to $6.6 trillion in bank funding to displacement, a figure that has sharpened scrutiny of digital dollar substitutes as lawmakers consider new legislation.

By contrast, executives at JPMorgan Chase have taken a more measured stance, arguing that stablecoins remain a niche product and that their impact on core banking functions is being overstated. The lender, the largest in the United States by assets, has said that while digital tokens may change the mechanics of payments, they do not currently threaten banks’ role in credit intermediation or financial stability.

JPMorgan’s position carries weight in Washington and on Wall Street, given its extensive involvement in payments infrastructure and digital finance. The bank has previously experimented with blockchain-based settlement systems and internal digital tokens designed to improve transaction efficiency among institutional clients. Senior figures at the firm have repeatedly stressed that most stablecoins still rely on traditional banks to hold reserves, process redemptions and provide access to the broader financial system.

The American Bankers Association, which represents lenders of all sizes, has argued that the emergence of yield-bearing stablecoins changes the equation. In its letter, the group warned 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, the association said, would reduce banks’ capacity to fund mortgages, small-business loans and consumer credit, with knock-on effects for economic growth.

The $6.6 trillion figure cited by the association reflects the scale of deposits that could, in theory, be vulnerable if stablecoins offering competitive yields gain broad acceptance. While critics say the estimate assumes an aggressive and unlikely shift in consumer behaviour, supporters of tighter oversight argue that even partial displacement could have material consequences.

Lawmakers weighing the issue are under pressure from multiple sides. Some senators have called for clear rules to bring stablecoin issuers under a federal regulatory framework, citing concerns over consumer protection, market integrity and financial stability. Others have emphasised the potential benefits of stablecoins for faster payments and financial innovation, warning against heavy-handed regulation that could push activity offshore.

JPMorgan’s more relaxed assessment 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. From this perspective, stablecoins may compete with certain deposit products but are unlikely to replicate the full suite of services provided by regulated lenders, particularly in areas such as credit underwriting and risk management.

The divergence in views also reflects differences within the banking industry itself. Community and regional banks, which rely heavily on deposits for funding, have been more vocal about potential risks, while larger institutions with diversified revenue streams and access to wholesale funding markets have tended to strike a calmer tone.

Beyond the immediate policy debate, the dispute highlights broader questions about how digital assets intersect with traditional finance. Stablecoins have grown rapidly as a settlement tool in cryptocurrency markets and cross-border transfers, yet their role in everyday commerce remains limited. Most are still used primarily within digital asset ecosystems, and episodes of volatility among some issuers have reinforced calls for stronger safeguards.

At the same time, the push to regulate stablecoins has accelerated as governments explore central bank digital currencies and private-sector payment innovations. For banks, the outcome of legislative efforts in Washington could shape competitive dynamics for years, determining whether stablecoins become tightly integrated into the financial system or operate as parallel instruments with lighter oversight.