JPMorgan Chase supports blockchain technology, but says stablecoins that pay interest could threaten the traditional financial system.

Cointelegraph reported on Jan. 13 that at a fourth-quarter earnings presentation, JPMorgan CFO Jeremy Barnum warned that interest-bearing stablecoins could create a regulation-free parallel banking system. He said he supports the direction of U.S. congressional stablecoin regulation legislation.

JPMorgan said it is not opposed to innovation, but that it could be risky if stablecoins serve as deposits without financial regulation. This aligns with moves in the U.S. banking industry against stablecoins. Banks are concerned that stablecoins could replace traditional finance, and see interest-paying models in particular as potentially threatening the existing deposit system.

The U.S. Congress is pushing the Digital Asset Market Clarity Act to tighten stablecoin regulation. Under the revision, it includes a provision banning the payment of interest simply for holding stablecoins. This is interpreted as a measure to prevent stablecoins from functioning like bank deposits. Cointelegraph reported that rewards for network participation, such as providing liquidity or governance activities, may still be allowed.