JPMorgan execs warn yield-bearing stablecoins risk becoming shadow banking

Senior JPMorgan executives have warned that allowing stablecoins to pay interest and generate yield could transform the innovation into a form of shadow banking. In a statement, Umar Farooq, Co-Head of Global Payments, and Peter Muriungi, CEO of Digital Assets and Blockchain Solutions, acknowledged that while tokenization and programmable money offer key innovations in global payments and 24/7 real-time settlement, they believe interest-paying stablecoins risk slipping into the shadow banking system. They emphasized that stablecoins should therefore be subject to the same regulatory standards as traditional bank deposits. Shadow banking refers to non-bank financial systems that perform bank-like credit functions while operating outside the strict liquidity regulations and depositor protection schemes of central banks.