JPMorgan backs US crypto legislation, but warns of “shadow banking” risks tied to stablecoin yields

JPMorgan Chase is publicly supporting new US legislation aimed at bringing more structure to the crypto industry, according to a report by Yahoo Finance. In its remarks, the bank backed the direction of tighter statutory rules for digital assets while flagging what it called a growing risk: digital asset activity that functions like “shadow banking,” where money-like products and leverage can build outside traditional banking oversight.

The bank’s message, as described in the report, focused on how certain crypto instruments can create financial risks even if they are marketed as cash-like. JPMorgan warned that stablecoin products offering yields can move economic functions traditionally performed by banks, such as maturity transformation and credit-like exposure, into less-regulated channels.

A central part of the bank’s stance was its call for stronger safeguards around yield-bearing stablecoins. Yield-bearing stablecoins are stablecoins designed to pay holders returns, typically by routing assets through strategies intended to generate income. JPMorgan argued that this design can make the products behave more like financial intermediaries, increasing systemic and consumer-protection risks if regulators do not require robust transparency and risk controls.

The report frames JPMorgan’s position as a balancing act. On one side, the bank said it wants clearer US crypto rules, which it views as necessary for legitimizing and stabilizing the market. On the other side, it cautioned that poorly designed or lightly supervised structures could replicate the problem regulators associated with the shadow banking system in the broader financial sector.

As a major US bank and one of the most prominent Wall Street lenders in markets tied to capital and payments, JPMorgan’s perspective can carry weight in how lawmakers and regulators think about guardrails for new digital-asset categories. The bank’s approach is also consistent with how large regulated firms often participate in crypto policy debates, seeking compliance clarity while pushing for guardrails on products that resemble credit or liquidity engines.

The report does not lay out the specific legislative bill or the exact regulatory mechanisms JPMorgan is advocating for, beyond the themes of stronger safeguards for yield-bearing stablecoins and attention to “shadow banking” risk. It also does not provide details on whether JPMorgan proposes specific capital requirements, liquidity standards, disclosure rules, or limits on how reserves backing stablecoins are managed.

Still, the bank’s emphasis suggests it is trying to shape the policy conversation around the economic function of crypto products, not only their marketing labels. By pointing to yield features, JPMorgan is effectively arguing that regulators should treat certain stablecoin arrangements as higher-risk financial products, even when they are issued on blockchain platforms.

What to watch next is whether the legislation JPMorgan referenced, and the final regulatory framework that follows, explicitly addresses yield-bearing stablecoin structures. Markets will also be listening for how regulators define “shadow banking” in the context of crypto, and whether rulemaking focuses on the mechanics of reserve management, liquidity, redemption rights, and investor protections.