JPMorgan Chase: Concerns Arise Over Tether’s Dominant Position in Stablecoin Market

According to a report from The Block, JPMorgan expressed concerns about the increasing dominance of Tether, the issuer of the stablecoin USDT, despite the encouraging growth of stablecoin market value in recent times. The report stated that Tether faces significant risks due to a lack of regulatory compliance and transparency. JPMorgan believes that the continuous growth of Tether over the past year has been detrimental to the stablecoin sector and the broader crypto ecosystem. Currently, based on data from CoinGecko, the total market value of stablecoins is $137 billion, with USDT accounting for 70% and the second-ranked USDC accounting for nearly 20%. Since the US banking crisis in March 2023, USDC experienced a market confidence shake when it temporarily unpegged, leading to a continuous decline in its market value, while USDT continued to rise. Analysts state that stablecoin issuers face regulatory risks globally. In the US, the “Stablecoin Clarity Act” is awaiting congressional approval. Additionally, in Europe, the Markets in Crypto-assets Regulation (MiCA) is expected to be partially implemented in June this year. Therefore, analysts believe that stablecoin issuers who strictly adhere to existing regulations will benefit from upcoming regulatory reviews and may gain market share. Paolo Ardoino, the CEO of Tether, responded by expressing his satisfaction with JPMorgan’s recognition of the importance of Tether and the stablecoin technology created by his company. However, he believes that the comments from JPMorgan, the world’s largest bank, regarding centralization seem somewhat hypocritical. He further added that the success of USDT is attributed to its financial reliability, substantial reserves, and commitment to emerging markets and developing countries. In these countries, the entire community views USDT as a lifeline to protect their families from high inflation and the devaluation of their domestic currencies. Tether recently released its reserve report for the fourth quarter, with excess reserves reaching $5.4 billion. The net profit for the fourth quarter was $2.85 billion, even surpassing Goldman Sachs’ $2.01 billion. JPMorgan analysts also mentioned that Circle, the issuer of stablecoin USDC, recently secretly applied for an IPO in the US, indicating Circle’s intention to expand internationally and actively prepare for forthcoming stablecoin regulations. Analysts state that stablecoins act as a bridge between traditional finance and the crypto world and function as “cash” in the crypto space. The expansion of stablecoins means more funds flowing from traditional finance into crypto, increased circulation of cash in the crypto space, and an increase in collateral, thereby making the crypto financial system more stable.