JPMorgan Freezes Stablecoin Startups Over Sanctions, AML Concerns

JPMorgan Chase (JPM) has frozen the accounts of several stablecoin startups due to compliance and sanctions risks, according to recent reports. The move has drawn attention as it highlights the increasing scrutiny banks are placing on crypto-related businesses, especially those operating in high-risk jurisdictions according to a report. Among the affected firms are Blindpay and Kontigo, both Latin America-focused platforms connected to JPMorgan through its partner Checkbook as reported.

The decision to freeze accounts reportedly stems from concerns over the number of disputed transactions and the lack of identity verification for users. One of the firms allowed transactions without requiring full customer identification, which is inconsistent with anti-money laundering (AML) requirements according to analysis. JPMorgan's action reflects broader regulatory pressures on banks to ensure their clients comply with international sanctions and AML rules.

The affected companies, Blindpay and Kontigo, are backed by Y Combinator and serve users in countries like Venezuela, which has been under economic sanctions for years. The startups' focus on emerging markets has exposed them to heightened regulatory risks, prompting JPMorgan to take action to mitigate potential violations as highlighted. A JPMorgan spokesperson emphasized that the decision was not targeted at stablecoins specifically, noting the bank continues to support stablecoin-related businesses that operate within compliance frameworks according to the bank.

Why the Standoff Happened

JPMorgan's move is part of a growing trend among banks to reassess their exposure to high-risk crypto activities. The freeze was reportedly triggered by an excessive number of chargebacks and suspicious transactions, which can indicate compliance gaps according to reports. These patterns raised red flags for the bank's compliance teams, which are tasked with ensuring JPMorgan does not face regulatory or reputational risks.

The issue also involves the lack of robust verification systems within the stablecoin platforms. One firm allowed users to transact without providing personal information, violating Know Your Customer (KYC) protocols. This lack of transparency can facilitate illicit activity and increase the likelihood of regulatory breaches for the bank as noted. JPMorgan's decision underscores the need for stablecoin firms to adopt stronger compliance measures if they hope to maintain banking relationships.

Risks to the Outlook

The broader regulatory landscape for stablecoins is evolving rapidly. In July 2025, the United States enacted the GENIUS Act, which imposes federal reserve and compliance standards on stablecoin issuers. The legislation requires issuers to maintain one-to-one reserve backing and submit regular audits. These rules are expected to reduce compliance risks for banks but also raise the bar for startups seeking traditional banking services according to industry analysis.

The JPMorgan freeze highlights the challenges stablecoin companies face in navigating the new regulatory environment. Banks are now less tolerant of non-compliance, and firms that fail to meet these expectations risk losing access to essential financial services. This dynamic could lead to a consolidation in the stablecoin industry, with only the most compliant and transparent firms surviving long-term as predicted.

What This Means for Investors

For investors, the incident signals increased volatility in the stablecoin sector. Startups that rely on traditional banking infrastructure may face operational disruptions if they fail to meet regulatory expectations. Additionally, the GENIUS Act and similar laws are likely to impact market capitalization and investor confidence, as compliance costs rise according to financial analysts.

The move also underscores the importance of due diligence for investors. With heightened scrutiny from regulators and financial institutions, stablecoin projects must demonstrate robust compliance practices to attract and retain backing. JPMorgan's actions may encourage other banks to adopt similar measures, further tightening the environment for crypto-linked firms as reported.