JP Morgan: Tether’s growing dominance is bad for cryptocurrencies

Author: Yogita Khatri, The Block; Compiler: Deng Tong, Golden Finance

• < p>JP Morgan analysts said: "Tether faces the greatest risk due to a lack of regulatory compliance and transparency."

• Tether's competitor Circle appears to be Actively prepare for upcoming stablecoin regulations.

JPMorgan Chase said that while the recent growth in stablecoin market capitalization is encouraging, Tether’s growing dominance raises concerns.

“Tether faces the greatest risk due to a lack of regulatory compliance and transparency,” JPMorgan analysts led by Nikolaos Panigirtzoglou wrote in a note on Thursday. “Therefore, We believe Tether’s increasing centralization over the past year has been detrimental to the stablecoin space and the broader crypto ecosystem.”

Analysts say stablecoin issuers are facing challenges globally Regulatory risks. In the United States, the Payments Stablecoin Clarity Act is awaiting congressional approval. Meanwhile, in Europe, Markets in Crypto-Assets (MiCA) regulation is expected to be partially implemented in June this year. As a result, analysts believe that stablecoin issuers that strictly adhere to existing regulations will benefit from the upcoming regulatory scrutiny and potentially gain market share.

Tether CEO Paolo Ardoino noted: “I am pleased to see JPMorgan Chase recognize the importance of Tether and the stablecoin technology our company has created.” “But in my opinion, the largest bank in the world JPMorgan’s comments about centralization seem a bit hypocritical.”

“Tether USDT’s success is driven by its financial reliability, strong reserves, and commitment to emerging markets and developing countries, where Entire communities look to USDT as a lifeline to protect their families from high inflation and devaluation of their national currencies,” Ardoino added.

Circle prepares for stablecoin regulations

Circle, the issuer of the stablecoin, recently secretly applied to be publicly listed in the United States. JPMorgan analysts said the move signalsCircle’s intention to expand internationally and proactively prepare for upcoming stablecoin regulations.

Analysts say stablecoins serve as a link between the traditional finance and cryptocurrency worlds, functioning like "cash" in cryptocurrencies. They added thattheir expansion means more funds coming into cryptocurrencies from traditional finance, more cash circulating in the cryptocurrency space, and an increase in collateral, making the crypto financial system more stable.