JPMorgan warns rushed CLARITY Act could create crypto gaps

JPMorgan cautioned lawmakers in a Monday post that moving quickly to write crypto rules while the Senate advances the CLARITY Act toward a July vote could create oversight gaps and regulatory loopholes. The bank raised concerns about protections for investors, consumers and law enforcement as digital tokens move deeper into payments, settlement and trading.

Umar Farooq, the bank’s global co‑head of payments, and Peter Muriungi, CEO of Digital Assets and Blockchain Solutions, argued tokens should be regulated by how they function rather than solely by their use of blockchain technology. They wrote that tokenization and programmable money can cut friction and speed settlement, but those gains depend on rules that preserve disclosure, custody, market integrity and consumer safeguards.

Stablecoins drew focused attention. JPMorgan noted stablecoins and tokenized money can enable faster cross‑border settlement, yet warned payment products can drift toward shadow banking when issuers or platforms offer rewards, cashback or yield‑like incentives without the capital, liquidity, supervision and consumer protections that apply to bank deposits. The bank has pushed for limits on such incentives and its leadership has been critical of stablecoin products that mimic deposit returns.

The bank also urged against broad exemptions that could reduce regulators’ visibility into illicit finance, opaque ownership and market manipulation. JPMorgan argued tokens that behave like securities should be subject to disclosure and custody requirements, and that decentralized platforms performing broker‑ or exchange‑like functions should carry obligations to support fair and transparent markets. The executives wrote: “When guardrails are weak or unclear, risk doesn’t disappear. It shifts and concentrates.”

JPMorgan noted its own activity in the sector, citing Kinexys by J.P. Morgan and JPM Coin, a deposit token used for near‑instant, 24/7 settlement among institutional clients. Those operations give the firm a direct stake in how federal rules are written and enforced.

Senate leaders are pressing to move the CLARITY Act quickly. The Senate Banking Committee approved the bill in May and Chairman Tim Scott has pushed for a July floor vote. Senate Majority Leader John Thune and the White House digital assets council director have urged action before lawmakers leave for an August recess. The House Financial Services Committee has scheduled a field hearing in New York for July 17 to discuss the legislation’s potential to support innovation.

Negotiators still face unresolved disputes and a compressed calendar. One central sticking point is an ethics dispute over restrictions on cryptocurrency business activity by public officials and their families, including the president. Democrats back limits that some Republicans may resist, creating a possible obstacle to securing the 60 votes needed to clear procedural hurdles on the Senate floor.

Market strategists have grown more cautious about the bill’s chances. One market firm recently cut its estimate of the odds that the CLARITY Act will become law next year to about 50%, citing a shrinking Senate calendar and outstanding policy disputes. Some strategists say formal Senate consideration could begin the week of July 13, with July 24 identified as an important calendar date before the August recess.