JPMorgan: Tether’s growing dominance is bad for cryptocurrencies

• “Tether is most at risk due to its lack of regulatory compliance and transparency,” said analysts at JPMorgan.

• Tether competitor Circle appears to be actively preparing for upcoming stablecoin regulations, analysts say.

JPMorgan said that while the recent growth in the market value of stablecoins is encouraging, Tether’s growing dominance raises concerns.

“Tether is most at risk due to its lack of regulatory compliance and transparency,” JPMorgan analysts led by Nikolaos Panigirtzoglou wrote in a note Thursday. “As such, we view Tether’s increasing centralization over the past year as a negative for the stablecoin space and the broader crypto ecosystem.”

Analysts say stablecoin issuers face regulatory risks around the world. In the United States, the Payment Stablecoin Clarity Act is awaiting congressional approval. Meanwhile, in Europe, the Markets in Crypto Assets (MiCA) regulation is expected to be partially implemented in June this year. Therefore, analysts believe that stablecoin issuers that strictly comply with existing regulations will benefit from the upcoming regulatory scrutiny and are likely to gain market share.

“I am glad to see JPMorgan Chase acknowledge the importance of Tether and the stablecoin technology our company has created,” Tether CEO Paolo Ardoino noted. “But in my opinion, it seems a bit hypocritical for the world’s largest bank to speak about centralization.”

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

Circle prepares for stablecoin regulation

The stablecoin’s issuer, Circle, recently filed confidentially for a public listing in the U.S. JPMorgan analysts said the move showed Circle’s intention to expand internationally and actively prepare for upcoming stablecoin regulations.

Analysts say stablecoins act as a link between the world of traditional finance and cryptocurrencies, functioning like "cash" in cryptocurrencies. They add that their expansion means more money flowing from traditional finance into cryptocurrencies, more cash circulating in the crypto space, and an increase in collateral, making the crypto-financial system more stable.