JPMorgan argues the stablecoin sector is at risk of a zero-sum game as competition tightens and regulation advances. This dynamic threatens the profitability of issuers like Circle (USDC) and could affect users who rely on easy availability and trust. The bank frames the outlook as a fight for market share rather than general demand growth.
Market dynamics and new entrants
Stablecoin growth has largely tracked the overall crypto market’s value, suggesting a reshuffling of share rather than the creation of new value. Tether (USDT) holds a primary position thanks to first-mover advantage and heavy usage, while pressure builds on Circle’s USDC. The upcoming launch of USAT—identified by JPMorgan as a competition catalyst—could force rivals to adjust strategies and incur costs to defend market share.
Traditional banks are moving in as well, including JPMorgan’s work on an internal institutional token, JPMD, as an attempt to modernize payments and capture digital-asset flows. This adds to the competitive pressure among established and emerging issuers.
- Concentrated competition — gains by some can be losses for others according to JPMorgan.
- Regulatory risk — MiCA and future rules in the U.S. could raise costs of following rules.
- Institutional banks — JPMorgan and others explore institutional stablecoins (JPMD).
- Competitive event — launch of USAT adds pressure on USDC but also rivals.
Regulation, profitability, and user impact
New rules—such as MiCA in Europe and potential U.S. legislation—will demand stronger reserves, transparency, and operational safety. That tighter framework could squeeze profits and reshape business plans. A stablecoin, the bank notes, is a digital token designed to maintain parity with a reference asset like the dollar through reserves or algorithmic mechanisms.
If fresh capital and broader use cases do not materialize, JPMorgan expects intense competition, scattered availability, and pressure on prices and fees. Issuers may have fewer incentives to innovate, while users will need to scrutinize reserves and compliance more carefully. Bank participation may improve standards but could narrow the field to players able to absorb regulatory costs. Jamie Dimon, CEO of JPMorgan, said: “I think they’re real but I don’t know why you’d want to use a stablecoin as opposed to just payment,” underscoring skepticism versus traditional systems.
The sector now watches the USAT launch and U.S. rulemaking as decisive events. Their outcome, according to JPMorgan, will indicate whether the market settles into zero-sum competition or finds avenues for broader growth.
