Dimon Escalates Bank-Versus-Crypto Fight Over Stablecoin Rewards

Jamie Dimon, the chief executive of JPMorgan Chase, the largest bank in the United States, intensified his opposition to proposed crypto legislation known as the CLARITY Act. He warned that the framework as written will not be accepted by the banks and could ultimately fail, and he criticized in blunt terms Brian Armstrong, the chief executive of the cryptocurrency exchange Coinbase.

The dispute centers on stablecoins, digital tokens designed to hold a fixed value of one dollar each. At issue is whether the companies that issue them should be allowed to pay yield-bearing rewards to holders, which would make the tokens resemble interest-paying bank deposits and compete directly with banks for customer money. A separate concern, raised by a fellow at the Brookings Institution research organization, is that the law could create regulation without adequate oversight, leaving the main derivatives regulator without the resources to supervise the market.

The dispute points to a deeper question about money. Stablecoins backed fully by short-term government debt function as a private, fully reserved form of money, which contrasts sharply with the fractional-reserve banking system, in which banks lend out most of the deposits they hold. The outcome will help decide how much of the system that moves United States dollars the established banks continue to control.