JPMorgan Leads Bank Coalition for Stablecoin Amid Regulatory Hurdles

JPMorgan Chase, along with other prominent U.S. banks, is reportedly in early discussions to jointly create a stablecoin. This initiative aims to compete with existing crypto-native stablecoins such as Tether’s USDT and Circle’s USDC. The banks involved in these talks include Bank of America, Wells Fargo, Citi, and other commercial banks.

Despite the optimistic outlook for the stablecoin market, JPMorgan has expressed skepticism about the projected growth. The bank's analysts, led by Nikolaos Panigirtzoglou, have described the forecast of a 4x increase in the stablecoin market size from the current $240 billion to $1 trillion in the next two years as "far too optimistic." This view contrasts with the expectations of other firms, including Standard Chartered, which anticipate significant growth in the stablecoin sector.

JPMorgan's cautious stance is rooted in the regulatory environment, particularly the restrictions outlined in the U.S. Senate's GENIUS Act and the House’s STABLE Act. These bills limit digital dollars to 'payment' instruments and non-interest yield, which could hinder the growth of stablecoins. The crypto industry, led by figures like Coinbase’s Brian Armstrong, has advocated for interest-bearing stablecoins, but the U.S. banking industry has strongly opposed this, fearing competition with traditional interest-bearing products like money market funds.

The analysts at JPMorgan noted that U.S. money market funds attracted over $900 billion in inflows last year, indicating that stablecoins with yield-bearing features could potentially erode this market share. Given these regulatory constraints, the growth of 'payment stablecoins' would likely depend on the overall expansion of the payment segment or the broader crypto market. The analysts estimate that this segment could command about 7-8% of the overall crypto market size.

However, yield-bearing stablecoins targeting institutional players, such as BlackRock’s BUIDL and Franklin Templeton’s BENJI, may experience significant growth despite regulatory hurdles. The Senate's GENIUS Act has recently cleared a key hurdle, raising hopes for a potential stablecoin regulatory framework by Q3 2025.

Overall, the stablecoin market size reached a record $249.5 billion, marking a +280% increase from $65 billion at the beginning of the current crypto bull run in 2023. The competition between crypto-native stablecoins and potential bank-issued digital dollars will be a key development to watch in the coming years.