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JPMorgan CFO warns stablecoins risk becoming ‘regulatory arbitrage’ play

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JPMorgan Chase Chief Financial Officer Jeremy Barnum said stablecoins may evolve into a form of regulatory arbitrage if new rules fail to align them with traditional banking standards.

Speaking on the bank’s first-quarter earnings call on Tuesday, Barnum framed the debate less as a technology shift and more as a question of oversight. Some stablecoin models could replicate bank-like products while avoiding the safeguards applied to deposits, including rules around interest payments and customer protections, he said.

“If the same product isn’t regulated the same way, you open the door to arbitrage,” Barnum said, pointing to structures that offer rewards resembling yield. In that scenario, he added, firms could “run a bank” without being subject to core banking regulations.

The comments come as lawmakers weigh new frameworks for digital assets. The proposed Clarity Act aims to define how crypto markets are split between regulators such as the Securities and Exchange Commission and the Commodity Futures Trading Commission. It also reflects broader efforts to establish clearer rules for stablecoins and related products.

The debate also extends to whether issuers of stablecoins, crypto tokens whose value is pegged to a traditional asset, mostly the dollar, should be allowed to offer yield to users.

Some crypto firms, including Coinbase (COIN), have pushed for the ability to pass interest earned on reserve assets to coin holders, arguing it would make stablecoins more useful as savings tools.

Banks have pushed back, saying yield-bearing stablecoins begin to resemble deposits without the same capital, liquidity and consumer protection requirements. In their view, that creates an uneven playing field, allowing non-bank firms to attract funds by offering returns regulated banks are restricted from providing.

The issue has become a central point of tension in Washington D.C., as policymakers weigh how to prevent stablecoins from functioning as bank-like products outside the traditional regulatory perimeter.

Barnum said JPMorgan supports the push for clarity, but stressed that consistency matters more than speed. Without it, he warned, new entrants could gain an advantage by operating outside existing regulatory boundaries.

He downplayed the idea that stablecoins will disrupt the bank’s core payments business. JPMorgan already runs a large wholesale payments network that processes transactions at low cost and high speed, leaving little room for margin-driven disruption.

Instead, the bank is integrating similar technology into its own systems. Through its blockchain unit, Kinexys, JPMorgan has developed tools such as JPM Coin and tokenized deposits, which allow institutional clients to move money around the clock and automate transactions.

Barnum described these efforts as part of a broader modernization strategy. Features often associated with stablecoins, such as programmable payments, are already being built into existing infrastructure rather than replacing it.

On the consumer side, he said stablecoins are often framed as “digital cash,” but still face familiar compliance hurdles, including identity checks.

JPMorgan reported stronger-than-expected first-quarter results, driven by a rebound in trading and investment banking. Net income rose 13% year over year to $16.49 billion, while revenue climbed 10% to $50.54 billion. The bank set aside less for potential loan losses than expected, signaling stable credit conditions among borrowers.

XRPL Taps Boundless for Bank-Grade Privacy on Public Chains

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The XRP Ledger (XRPL) used by blockchain payments company Ripple has tapped Boundless, a zero-knowledge infrastructure provider, to let banks and asset managers execute confidential yet compliant transactions directly on the network, according to a Tuesday release shared with Cointelegraph.

Boundless chief executive Shiv Shankar told Cointelegraph the design aims to shield details like transaction size, frequency and counterparties from public view, while still allowing regulators to audit activity via selective disclosure and role-based access controls.

Boundless’ integration is meant to enable a range of institutional use cases that have historically been challenging to run on fully transparent ledgers. Those include cross-border business-to-business payments, treasury and capital management, over-the-counter positions, tokenized asset issuance and decentralized exchange or lending activity, where order flow and positions are highly sensitive, according to Shankar.

For public blockchains, that trade-off between transparency and confidentiality has become a central barrier to institutional adoption, as banks and asset managers seek to protect trading strategies and client activity without falling out of step with regulatory oversight. 

The move positions XRPL in an increasingly competitive race to deliver bank-grade privacy on public blockchains, as institutions push to avoid what Shankar described as the “transparency tax” of fully visible onchain activity.

Privacy race expands across ZK and FHE approaches

In March, cryptography company Zama integrated its fully homomorphic encryption (FHE) stack with institutional tokenization platform T-REX, pitching its technology as a confidentiality layer for ERC-3643 securities (tokenized financial instruments that embed compliance rules into the token standard) on upcoming T-REX public networks.

Related: Moody’s brings credit ratings onchain with Canton Network integration

Other projects are betting on different flavors of zero-knowledge technology, including zkSync’s Prividium environment, which aims to anchor private institutional execution to Ethereum via ZK proofs while keeping raw transaction data off public view.

Shankar said that projects like zkSync require institutions to launch their own layer-2s, which involves greater investment and overhead. In contrast, Boundless deploys solutions via smart contracts, which he said allows institutions to “stay where the liquidity is” (on Ethereum), and “gain more flexibility on where they deploy their products.”

Shankar said the design aims to replicate the selective disclosure controls of traditional finance in an onchain environment, rather than forcing institutions to choose between privacy and compliance.

Privacy shifts from feature to core infrastructure

The rollout highlights how privacy is becoming a feature of base-layer and tokenization infrastructure rather than an optional add-on.

The tokenized asset market reached $29.25 billion in April 2026, up 7.9% in a month, according to data from RWA.xyz.

Total RWA value. Source: RWA.xyz

As more real-world assets migrate onchain and traditional players experiment with tokenized funds, deposits and securities, pressure is mounting on networks to accommodate both institutional secrecy and supervisory oversight.

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