A sharp fault line is forming across the digital asset industry between crypto products that increasingly resemble regulated financial institutions and a traditional banking sector warning that some of those innovations may be going too far.
That tension is on full display this week. JPMorgan is cautioning that yield-bearing stablecoins risk recreating core banking functions without the safeguards built up over decades of regulation.
At the same time, Wall Street’s engagement with crypto continues to deepen, with Morgan Stanley’s exchange-traded fund (ETF) filings signaling what analysts describe as the next phase of institutional adoption, one that could force other banks to accelerate their own strategies.
Crypto-native companies are pushing further into regulated territory. Trump-linked World Liberty Financial is expanding its USD1 stablecoin into crypto lending; Figure Technology, meanwhile, is testing how far blockchain infrastructure can reach into capital markets by enabling onchain stock lending tied to real equity.
This week’s Crypto Biz takes the pulse of the growing tension between traditional finance and the expanding reach of digital asset markets.
JPMorgan Chase has embraced blockchain technology and expressed interest in stablecoins, but yield-bearing versions could pose significant risks to the financial system, according to the bank’s chief financial officer, Jeremy Barnum.
Speaking during JPMorgan’s fourth-quarter earnings call, Barnum addressed questions around stablecoins amid renewed lobbying by the banking sector and ongoing congressional scrutiny of digital asset legislation.
Barnum cautioned that interest-bearing stablecoins could replicate core banking functions without being subject to the same regulatory and prudential standards.
“The creation of a parallel banking system that sort of has all the features of banking, including something that looks a lot like a deposit that pays interest, without the associated prudential safeguards that have been developed over hundreds of years of bank regulation, is an obviously dangerous and undesirable thing,” he said.
Concerns like these help explain why banks have taken a cautious stance toward yield-bearing stablecoins, something Cointelegraph flagged last May.
As crypto investors continue to debate the relevance of the four-year market cycle, Binance Research argues that a more consequential shift is unfolding: the next phase of institutional adoption, led perhaps unexpectedly by Morgan Stanley.
In its latest macro weekly report, Binance Research pointed to a “structural pivot” in digital asset markets, citing recent S-1 filings by Morgan Stanley related to proposed Bitcoin (BTC) and Solana (SOL) exchange-traded funds as a key development.
Binance Research said Morgan Stanley’s move could pressure other major banks, including Goldman Sachs and JPMorgan, to accelerate their own crypto strategies in order to remain competitive as institutional participation in digital assets expands.
World Liberty Financial is expanding into crypto lending, moving its $3.4 billion USD1 stablecoin into a new lending and borrowing platform called World Liberty Markets.
According to the company, the platform enables users to post collateral in a range of cryptocurrencies, including Ether (ETH), a tokenized version of Bitcoin and stablecoins USDC (USDC) and USDt (USDT). Loans are denominated in USD1, positioning the stablecoin as a core settlement asset within the lending system.
World Liberty co-founder Zak Folkman told Bloomberg that additional forms of collateral, including tokenized real-world assets, are expected to be introduced as the platform broadens its lending offerings.
The lending rollout follows World Liberty’s recent application for a national trust bank charter with the US Office of the Comptroller of the Currency, which the company said would support broader adoption of USD1 across cross-border payments and treasury operations.
Figure Technology Solutions, a blockchain-based lending and financial infrastructure company, has launched a new system for stock lending that allows investors to lend shares directly to one another without relying on traditional intermediaries.
The platform, called the On-Chain Public Equity Network (OPEN), allows companies to issue real equity using Figure’s Provenance blockchain. Equity issued on OPEN represents actual ownership rather than synthetic exposure.
Figure CEO Mike Cagney said the shares can be lent or pledged directly onchain without custodians or other intermediaries. He added that several companies have already expressed interest in issuing shares on OPEN, including digital asset treasury companies.
