JPMorgan backs Clarity Act but warns of 3 regulatory gaps in crypto bill

JPMorgan Chase threw its weight behind the Digital Asset Market Clarity Act on Monday, but the bank's endorsement came with a pointed warning: the bill must close three specific regulatory gaps or risk creating a shadow banking system in digital assets.

"Labeling matters less than substance," Umar Farooq, global co-head of JP Morgan Payments, and Peter Muriungi, CEO of Digital Assets and Blockchain Solutions, wrote in a blog post published June 29. The executives argued that crypto assets and platforms performing bank-like, broker-like or exchange-like functions should face the same capital, liquidity, disclosure and consumer protection standards as traditional finance.

The bank's position lands as Senate negotiators race to finalize compromise text for the Clarity Act, with Sen. Cynthia Lummis (R-Wyo.) announcing plans to release the revised bill over the July 4 holiday weekend and push for a floor vote in July. The House passed H.R. 3633 by a 294-134 margin in July 2025, and the Senate Banking Committee advanced the bill 15-9 on May 14. But the legislative runway is shrinking: the Senate enters its August recess on Aug. 8, and analysts including Galaxy Digital's Alex Thorn have warned that failing to pass before the break would sharply reduce the bill's chances this year.

JPMorgan's warning focused on three areas. First, stablecoin rewards: the bank said products offering cashback or yield for holding digital balances could confuse consumers into believing they have deposit insurance, increasing run risk during stress. The revised Section 301 of the bill allows rewards programs but prohibits benefits tied directly to account balances in a way that replicates traditional bank interest — a compromise that has not satisfied the banking industry. JPMorgan CEO Jamie Dimon said earlier this month that "the banks will not accept it that way," pledging to fight the issue "down to the wire."

Second, decentralized finance: the bank called for stronger anti-money laundering requirements across DeFi protocols, warning that exemptions for core transaction infrastructure could conceal ownership and create blind spots for law enforcement and national security agencies. Lummis has acknowledged that DeFi provisions and AML language remain among three open negotiating items, alongside ethics clauses for senior government officials with crypto ties.

Third, functional equivalence: JPMorgan argued that assets behaving like securities should remain subject to SEC disclosure and custody rules regardless of whether they are issued on a blockchain, and that decentralized platforms acting as exchanges or brokers should face comparable market integrity obligations. "If policy prioritizes speed over substance, it will invite instability, not leadership," the executives wrote.

The bank's own digital asset operations continue to expand. JPMorgan recently launched JPM Coin through its Kinexys blockchain division for institutional settlement and is developing tokenization and programmable money products. The executives said those projects demonstrate that blockchain innovation can operate inside a regulated environment — and that companies offering economically similar services should operate under similar rules.

The analytical question now is whether the remaining DeFi, AML and ethics language can be resolved before the August recess without unraveling the Section 301 compromise that neutralized the banking sector's most pointed objection. Lummis, who has announced she will not seek reelection in 2026, has until January 2027 to lock in the framework she has spent three sessions constructing. The July floor vote will determine whether she gets there.

This article is for informational purposes only and does not constitute investment advice.