Jeremy Barnum questions the regulatory nature of high-yield stablecoin platforms

Jeremy Barnum, JPMorgan’s Chief Financial Officer, has expressed serious concerns about the operating model of stablecoin platforms that offer yields on the blockchain. According to the executive, these platforms essentially function as unregulated financial institutions, leveraging blockchain technology as a mechanism to evade regulatory frameworks that have protected depositors for centuries.

The modus operandi of Usual, ENA and Unitas: Attracting funds through competitive rates

The three platforms mentioned above – Usual, ENA and Unitas – follow a similar pattern: they attract capital by offering yields that mimic the interest rates on traditional bank deposits. However, unlike regulated financial institutions, these platforms operate without being subject to the same prudential supervision requirements. Jeremy Barnum points out that this business model replicates the behavior of traditional financial intermediaries, but without the fundamental safeguards that define conventional banking.

Regulatory gaps: The absence of capital limits and insurance coverage

The critical point pointed out by the JPMorgan executive lies in two structural deficiencies. First, these platforms lack rigorous capital adequacy requirements, which means they can operate with insufficient backing in the face of market shocks. Second, deposits are not protected by deposit insurance schemes equivalent to those offered by banking regulation. This combination creates a vacuum where risks are fully transferred to end users.

A financial risk that replicates historical patterns

Jeremy Barnum warns that this strategic evasion of prudent regulation creates conditions conducive to financial crises. The economic history of the twentieth century shows that financial systems without adequate supervision tend to accumulate risks to the point of generating systemic collapses. Yield stablecoin platforms, according to JPMorgan’s CFO analysis, exhibit characteristics alarmingly similar to the unregulated institutions that precipitated previous crises, especially because of their reliance on depositors’ trust without tangible security backings.