JPMorgan CFO Jeremy Barnum has warned that yield-bearing stablecoins could create a risky parallel banking system. He shared these concerns during a recent earnings call. According to Barnum, these digital assets look more like bank deposits than most of the people realize. Yield-bearing stablecoins offer users regular returns. In many cases, these returns are from […]
JPMorgan CFO Jeremy Barnum has warned that yield-bearing stablecoins could create a risky parallel banking system. He shared these concerns during a recent earnings call. According to Barnum, these digital assets look more like bank deposits than most of the people realize.
Yield-bearing stablecoins offer users regular returns. In many cases, these returns are from between 4% and 6%. Issuers usually earn this yield by investing reserves in U.S. Treasury bills. While this seems to be safe, Barnum believes that the structure can create serious problems.
Barnum explained that these stablecoins act like bank deposits. They pay interest and store the funds of customers. However, they don’t follow the same rules as banks. Traditional banks must hold capital reserves and manage liquidity risks. While also providing deposit insurance to protect customers.
Stablecoin issuers don’t have these requirements, and so banks worry about this gap. Barnum said it allows companies to avoid long-standing safeguards that protect the financial system. He warned that this could lead to instability during market stress.
The stablecoin market has grown very fast, because by mid-2025, the market value passed $230 billion. Some forecasts expect it to reach $500 billion or more in the near future.
Products like USDC highlight the issue. On platforms such as Coinbase, USDC offers a yield of about 4.1%. It reportedly holds around $12 billion in customer deposits, and for banks, this is more of a red flag. Since, higher returns and easy access could pull money away from savings accounts.
Barnum warned that large-scale deposit movement could weaken traditional banks. This could make the financial system more fragile over time.
Barnum’s comments support ongoing calls for regulation. Such as industry leaders and lawmakers discussing bills like the GENIUS Act. These proposals aim to apply bank-like rules to yield-bearing stablecoins.
Supporters say fair rules would reduce the risk. They also argue that similar products should follow the same kind of standards. Without this, a shadow banking system could grow unchecked.
Critics disagree with having stricter rules, becaue they say that it could slow innovation. Many believe that stablecoins improve speed, have low costs and gives more access to finance. Although, some also argue that decentralized finance already operates with transparency through blockchain technology.
Still, as stablecoins grow, regulators face a challenge. They must protect financial stability and at the same time, they must avoid blocking useful innovation. Barnum’s warning shows this debate is not really over yet.
