JPMorgan (JPM) expressed concerns in a recent research report about the growing prevalence of stablecoin Tether (USDT), indicating that it negatively impacts the broader crypto ecosystem.
The bank pointed out that the rising prominence of tether over the previous year is detrimental to both the stablecoin sphere and the wider cryptocurrency landscape.
Analysts, including Nikolaos Panigirtzoglou, noted that stablecoins are encountering regulatory challenges in various regions, with Tether (USDT) being particularly vulnerable due to its deficiencies in regulatory compliance and transparency.
The bank highlighted that while some stablecoins are grappling with regulatory pressures, this scenario presents an opportunity for those issuers who have aligned closely with existing regulations to potentially gain market share amid any intensified regulatory actions. USD Coin (USDC) is mentioned as a potential beneficiary in this context, especially considering its efforts to go public in the U.S. and its proactive stance towards adhering to anticipated stablecoin regulations.
Despite these dynamics, JPMorgan pointed out that Tether has experienced remarkable growth, both in terms of market capitalization and market presence, enjoying widespread adoption on various crypto exchanges and DeFi platforms. Notably, the issuer of Tether recently declared an unprecedented profit of $2.85 billion for the last quarter and disclosed that its primary token is nearing a market valuation of $100 billion.
The crypto community is currently scrutinizing the stance of JPMorgan, especially in light of recent political developments. Notably, presidential candidate Donald Trump has expressed strong opposition to the establishment of a U.S. Central Bank Digital Currency (CBDC), denouncing it as a significant threat to individual liberties. Trump’s perspective aligns with the arguments presented by Republicans in various states, including Florida and North Carolina, and more recently, at the national legislative level.
Conversely, Democrats, with President Joe Biden among them, have generally shown a greater openness to the idea of the Federal Reserve introducing a digital dollar . This political divide is brought into sharper focus considering the recent commendations from JPMorgan Chase CEO Jamie Dimon towards former President Trump.
Dimon not only acknowledged Trump’s achievements but also cautioned Democrats to approach Trump’s supporter base with more respect, suggesting that failing to do so might jeopardize President Biden’s chances of re-election.
Paolo Ardoino, the CEO of Tether, recently criticized JPMorgan, calling out the bank’s “hypocrisy” for voicing apprehensions about Tether’s prominent role in the cryptocurrency market, particularly when considering JPMorgan’s status as the world’s largest bank.
In a statement, Ardoino argued that despite the adverse views held by competitors and banking institutions, Tether’s leading market position has been fundamentally beneficial for the burgeoning cryptocurrency sector.
“Tether’s market domination may be a ‘negative’ for competitors including those in the banking industry wishing for similar success but it’s never been a negative for the markets that need us the most.”
In both the US and Europe, stablecoins are on the brink of facing stricter regulations. In the US, the Clarity for Payment Stablecoin Act is pending a vote in the House of Representatives, whereas in Europe, a segment of the Markets in Crypto-Assets Regulation (MiCA) is slated for partial implementation in June of this year.
Following a $41 million fine levied by the CFTC in 2021 for misrepresenting its reserves, Tether has taken steps to enhance the transparency of its operations and financials, providing quarterly attestations. Despite these efforts, a report indicates that Tether still falls short of its competitor, Circle, in terms of regulatory compliance, specifically regarding Circle’s USDC token.
In the realm of cryptocurrency trading, Tether is the most widely traded, ranking just behind Bitcoin and Ethereum in terms of market capitalization. Meanwhile, Circle’s USDC stands as the seventh-largest digital token, boasting a market cap of approximately $27 billion, as per data from CoinMarketCap.