According to reports, both startups had connected to JPMorgan through Checkbook, a United States-based payments company. But the association with high-risk jurisdictions set off alarm bells. In its statement, JPMorgan insisted it is not cracking down on stablecoins. “This has nothing to do with stablecoin companies,” a bank spokesperson allegedly said. “We bank both stablecoin issuers and stablecoin-related businesses, and we recently took a stablecoin issuer public.”

JPMorgan freezes accounts over Venezuela sanctions

Still, the startups’ activity in Venezuela triggered concerns tied to the United States’ financial rules, especially sanctions enforcement. Banks like JPMorgan are mandated to know who they’re dealing with and where their money is coming from, or else the SEC would visit with sanctions.

While JPMorgan was shutting off access, President Donald Trump was going full steam ahead with new actions against Venezuela. Two weeks ago, Trump’s administration intercepted two tankers full of Venezuelan oil, with a third one now being tracked. Speaking to reporters, the president said, “Maybe we will sell it, maybe we will keep it. Maybe we’ll use it in the strategic reserves. We’re keeping the ships also.”

At the center of the crackdown is Venezuela’s state oil company, PDVSA, which has been blacklisted under Executive Orders 13850 and 13884 since 2019. Trump’s Treasury Department claimed in its official notice that oil sales are keeping Nicolás Maduro’s regime afloat. Earlier this month, they officially labeled fentanyl (which they allege flows through Venezuela) a “weapon of mass destruction.”

The United States Treasury Department, on December 11, sanctioned six shipping companies that have been moving oil out of Venezuela using shady location tactics and fake data transmissions. The first company is Myra Marine Limited, based in the Marshall Islands. Next is Arctic Voyager Incorporated, also from the Marshall Islands. Then there’s Poweroy Investment Limited, registered in the British Virgin Islands.

Ready Great Limited, also from the Marshall Islands, was also sanctioned along with Sino Marine Services Limited, a UK-registered company that runs the TAMIA (IMO: 9315642), which was flagged in Hong Kong. Lastly, Full Happy Limited, also registered in the Marshall Islands, took on oil in late May and sent it to Asia. Just like the others, it got hit with the same designation: E.O. 13850.

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Nikolaos Panigirtzoglou, a strategist at JPMorgan, said Thursday that if Bitcoin’s volatility keeps falling and starts to match more traditional assets like gold, then investment allocations could follow. “Expect that the allocations to Bitcoin by institutional investors could match those of competing asset classes such as gold if there is convergence in volatilities,” he wrote. Right now, that convergence is real. According to him, the gap between gold’s and Bitcoin’s volatility is “the lowest on record.”

JPMorgan predicts Bitcoin stability and corporate pullback

There is a reason this is happening. Over the past year, a lot of corporate treasurers have been taking their Bitcoin out of circulation, and it is not something small. According to JPMorgan, this “intense withdrawal” has had a real effect. More coins are being held passively. Less trading. Less panic selling. Less hype buying. That’s been working like a brake on the madness.

These treasurers, mostly copycat versions of MicroStrategy, have actually grabbed more than 6% of Bitcoin’s entire supply. They’re also getting added to global equity indices. That gives them even more legitimacy and more eyes. JPMorgan says this trend is “helping to make Bitcoin more attractive from a valuation point of view.”

It all comes back to risk. Panigirtzoglou explains it clearly: institutional investors don’t like throwing their cash at anything that sucks up too much risk capital. He said: “The reason is that, for most institutional investors, the volatility of each class matters in terms of portfolio risk management and the higher the volatility of an asset class, the higher the risk capital consumed by this asset class.”

That would push the price up to around $126,000. That number isn’t just pulled from thin air. It’s only a little above the record Bitcoin already set last weekend. Right now, though, Bitcoin’s price is lagging. Panigirtzoglou said, “The gap between the Bitcoin price and our volatility-adjusted comparison to gold shifted from highly positive territory at the end of 2024,” back when it was around $36,000, “to negative territory currently,” meaning the current price is roughly $16,000 too low.

According to him, that gap is quite big, noting that the gap means one thing: “some upside potential for Bitcoin currently.” As of Thursday, Bitcoin was trading about 10% lower than its recent all-time high. So it’s close. But not quite there.

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A new report by managing director Nikolaos Panigirtzoglou emphasizes this trend, indicating a rise in international support for a tokenized financial system that aligns with entrenched financial regulations safeguarding traditional banking institutions.

Regulators Prefer Safer, Controlled Digital Money

Those in charge outside the United States are leaning towards tokenized deposits, which work within the structure of the banking system. Andrew Bailey, the Governor of the Bank of England, said that he would prefer the banks to tokenize central bank deposits rather than create their stablecoins. JPMorgan analysts believe that this is an indicator of a larger trend towards secure and controlled digital money that echoes conventional deposit guarantees, such as coverage and access to the central bank.

Digital tokens represent traditional deposits (digital versions of conventional deposits) based on blockchain infrastructures. This is achieved through instruments that are compliant with KYC and AML regulations and combine the advantages of blockchain (e.g., quick settlement and programmability).

Non-Bearer Tokenized Deposits Gain Institutional Backing

JPMorgan clarifies that the two types of tokenized deposits include bearer and non-bearer. Bearer deposits are tradable, and they can decline in value because of the market’s variability or the issuer’s risk. This fluctuation in price may wreak havoc on financial stability and unequal types of money.

Non-bearer-focused tokenized deposits, on the other hand, are non-transferable but settle directly among banks utilizing central bank money. They have a definite fixed value of one to one, which facilitates the integrity of the financial system. The non-bearer forms also work well with the banking infrastructure without discrepancies in prices.

The bank cited a 2023 paper by economists Rod Garratt and Hyun Song Shin, who cautioned that transferable tokens such as stablecoins can experience valuation errors. JPMorgan asserts that non-bearer deposits inject more predictability and integrity into the financial system.

Stablecoins Remain Key to Crypto Liquidity

Even with the enhanced regulation, stablecoins continue to take the lion’s share of the digital asset market because of their liquidity and convenience benefits. Tether and USD coin have a considerable percentage of the exchange, the DeFi sector, and remittance across international borders.

To JPMorgan, stablecoins do not drain funds within the banking system because their reserves are held in safe or short-term investments, particularly in US Treasury bills. Nevertheless, the prospect of issuing stablecoins might not attract the banks in the relevant regulatory plans, including the serious plans of the Bank of England, which will restrict interest yields and flexibility.

In comparison, legislators in the US are pioneering the legislation of stablecoins. President Trump will sign the GENIUS Act, which could enable banks to issue stablecoins through the existing payments faculty.

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JPMD will represent dollar deposits in the bank, bridging another gap between fiat and crypto. The pilot JPMD token will also be launched on Coinbase for early tests. The first transaction is expected to happen within days. JPMorgan has already minted tokens in a digital wallet and will deposit them to the crypto exchange, using the Base L2 chain. While Base is open to anyone, the JPMD token will be restricted only to the whitelisted clients of JPMorgan.

JPMorgan will allow institutional clients to use JPMD

According to JPMorgan, JPMD will be denominated in US dollars and represent deposits in the bank. The asset will be used in a pilot program running for several months and will be available to Coinbase’s institutional clients. The token will not be freely used among users and retail clients. JP Morgan has also mentioned other currencies, launching additional specialized stablecoins pending regulatory approval.

The bank will launch its stablecoin as acceptance of digital dollar-denominated assets is growing. The launch arrives just a week after the Genius Bill on stablecoins passed a key vote and headed to the US Senate. Deposit tokens are not totally similar to stablecoins, as they represent a deposit claim against a commercial bank. They are a digital version of the deposits belonging to customers, hence fully backed by fiat. The JPMD asset will be the first instance of tokenizing direct bank deposits on a public blockchain, in this case, the widely used Base.

Unlike stablecoins, deposit tokens can also bear the same interest as the deposit. The idea of the bank is to use JPMD to target users who are looking for an alternative to stablecoins produced by a commercial institution. Currently, stablecoins may have trouble securing banking services and showing proof of deposits, which would be trivial for JPMorgan. JPMorgan manages roughly $10T transactions daily, of which $2B go through its native chain.

Adopting Base will give the bank access to a public network with minimal costs and a chance to connect to the wider Ethereum ecosystem, as well as Coinbase’s institutional user base. The bank has tested multiple on-chain payment techniques and believes deposit tokens may become a widely used form of money for the digital ecosystem. Currently, transferring fiat into stablecoins is not always smooth for either retail or institutional investors, with each stablecoin having different requirements.

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According to Goldman Sachs’ report, its earnings on a share is around $11.95, putting its revenue around $13.87 billion. The figure outpaced analysts’ expectations of ac$8.22 per share on revenue of $12.39 billion. The figures were helped by a bug rebound in investment banking deals, coming at the same time with rising trade revenues. While the shares were up by 2.1%, the wider market barely cared.

Wall Street giants post gains

Another Wall Street big name, JPMorgan Chase, also recorded a $4.81 per share on revenue of $43.74 billion, outperforming analysts’ $4.11 per share. While its performance was boosted by fixed-income and investment banking, the shares saw a 1% rise, but the market remained unaffected.

Wells Fargo also saw its fair share, reporting an adjusted $1.42 per share that beat the $1.35 that analysts projected. The bank’s shares surged by 3.2%, thanks to the projection of an increase in net interest income from 1-3% in 2025.

Citigroup had the coolest comeback story, posting $1.34 per share on $19.58 billion. Meanwhile, analysts already made a bet of $1.22 per share and $19.49 billion. The bank exceeded expectations, with its shares rising by more than 3%.

BlackRock, the biggest asset manager globally, also posted remarkable Q4 earnings, seeing $11.93 per share on $5.68 billion in revenue. The performance was ahead of forecasts, with its stock seeing a 3.7% surge.

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Investor interest wanes, reflecting in ETF outflows

A significant focal point of JPMorgan’s report is the dwindling investor interest in spot Bitcoin ETFs, underscored by a marked withdrawal of funds—the largest seen since the ETFs’ launch on January 11. This trend of outflows, coupled with Bitcoin’s classification as ‘overbought’ by the strategists, signals a cautious outlook for the cryptocurrency. The strategists predict that the lead-up to the halving event in April may trigger further declines, exacerbated by an apparent slowdown in net inflows and a recent week marked by notable outflows from spot Bitcoin ETFs.

While JPMorgan’s forecast points towards a price correction post-April, with potential lows dipping below $50,000, opinions in the market vary. Naeem Aslam from Zaye Capital Markets highlights a need for more momentum as a critical barrier to sustaining Bitcoin’s recent rally. On the other hand, Crypto analyst Michael van de Poppe sees the cryptocurrency entering a consolidation phase following a price recovery post-FOMC meeting. This mixed sentiment paints a complex picture of Bitcoin’s immediate future, with some analysts expecting sideways movement and others predicting a steeper decline.

Market dynamics signal caution ahead

The analysis by JPMorgan’s team brings to light bearish indicators that could influence Bitcoin’s market outlook. A notable point is the sustained open interest in CME Bitcoin futures juxtaposed with dwindling ETF inflows, suggesting a bearish sentiment among investors. This shift challenges previous expectations of continued strong inflows into Bitcoin ETFs, pointing towards a possibly tumultuous period as the halving event approaches.

As the cryptocurrency market stands on the cusp of potential volatility, the divergent views among analysts and investors underscore the complexity of predicting Bitcoin’s trajectory. With careful monitoring of market indicators and investor sentiment, the coming months will be critical for stakeholders looking to navigate the uncertainties of the digital currency landscape.

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Industry experts question the validity of Armstrong’s statement

Matt Hamilton, former director at Ripple, along with other industry analysts, has doubts about Armstrong’s claim’s credibility. Hamilton pointed out that JPMorgan’s alleged purchase of 7.5 million XRP tokens would represent a negligible 0.0075% of the total XRP supply. This proportion hardly suggests a significant market impact or a strategic shift by the bank.

Further analysis reveals a more striking discrepancy. Armstrong’s claim implies that the investment accounts for about 7.5% of JPMorgan’s total wealth. However, considering JPMorgan’s reported total assets of $3.89 trillion in 2023, the value of 7.5 million XRP (approximately $4.46 million) would constitute only a tiny fraction of the bank’s wealth, starkly contrasting with Armstrong’s assertion.

Previous misinformation and the need for credible sources

This incident is not the first of its kind in the crypto sector. Similar unverified claims regarding JPMorgan’s involvement in XRP emerged last year but were quickly dismissed due to a lack of substantiation and mathematical errors. These recurrent narratives, often lacking credible sources, highlight the necessity for accurate information in the highly speculative cryptocurrency market.

The current controversy has led some to question the reliability of Armstrong’s sources and even the possibility of his account being used to disseminate misinformation. As the story unfolds, it underscores the critical need for verifiable facts, especially when involving major financial entities like JPMorgan in the volatile cryptocurrency world.

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The practical application of JPM Coin’s new feature is already in motion. Siemens successfully used programmable payments for contingency fund transfers this week. Additionally, FedEx and Cargill are gearing up to implement this feature. These early adoptions underscore the growing trend towards digitalization in corporate finance. The programmable aspect of JPM Coin adds to its existing capability of facilitating real-time money transfers globally. Since its launch in 2019 on JPMorgan’s Ethereum-based blockchain Onyx, JPM Coin has seen remarkable uptake, reportedly managing $1 billion in daily transfers.

Expanding blockchain frontiers in finance

JPMorgan’s foray into blockchain and crypto-related projects is aggressive and forward-thinking. The Onyx platform not only handles JPM Coin transactions but also supports trading in tokenized securities. Recently, the platform played a pivotal role in tokenizing money market fund shares for BlackRock, which Barclays utilized as collateral in a derivatives contract. This venture into blockchain technology by JPMorgan, including the success of JPM Coin, illustrates the bank’s commitment to innovating in the digital finance space.

Moreover, JPMorgan’s blockchain business unit, Onyx, has now made programmable payments generally available. This advancement marks a milestone in the evolution of JPM Coin, with programmable payments automating transactions based on pre-established rules. This feature is a boon for JPMorgan’s institutional clients, enhancing their treasury functions. It also addresses challenges like treasury downtime during weekends and holidays, as JPM Coin operates continuously.

JPMorgan’s initiative with JPM Coin and programmable payments is not just about enhancing current financial systems. It’s a vision for the future. While JPM Coin currently processes a fraction of JPMorgan’s daily transactions, there’s a roadmap to expand these services to retail consumers. Such steps are significant in the broader context of digital finance, where traditional banking systems and emerging blockchain technologies are increasingly intersecting.

This continuous innovation and adoption of digital finance tools like JPM Coin signal a transformative period in corporate finance. JPMorgan’s leadership in integrating blockchain technology into mainstream banking operations paves the way for a more efficient, secure, and flexible financial ecosystem. The bank’s commitment to exploring and implementing these advancements reflects a proactive approach to the evolving landscape of digital finance.

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The process commenced with BlackRock tokenizing shares of one of its money market funds via the TCN. These tokenized shares were then swiftly transferred to Barclays, serving as collateral in an over-the-counter derivatives trade. This technique of tokenizing traditional financial assets, although not new, has been propelled into the limelight with JPMorgan’s successful transaction, depicting a promising trajectory for banks in the digital age. Moreover, entities such as Citi have begun embracing this digital transition, hinting at a burgeoning trend within the financial sector.

Accelerating transactions, cutting costs

The allure of tokenization lies in its ability to significantly truncate the time typically required to process transactions. According to JPMorgan, the tokenization and transfer of assets were executed within minutes, showcasing a stark contrast to the conventional, more time-consuming methods. This expedition of asset transfer between BlackRock and Barclays not only epitomizes a first for the involved institutions but also pioneers the use of money market fund shares as collateral between bilateral derivatives counterparts.

Tyrone Lobban, the Head of Onyx Digital Assets at JPMorgan, delineated the advantages of the Tokenized Collateral Network. He noted that the TCN facilitates clients in accessing intraday liquidity through repo transactions, and with its launch, clients can now leverage tokenized money market fund shares as collateral. This method, as Lobban elucidated, is a quicker, more cost-efficient avenue for meeting margin requirements.

The pilot transaction heralds not only a successful test for JPMorgan’s blockchain-based collateral settlement but also a glimpse into a future where financial transactions are expedited and costs are pared down. The TCN, initially tailored for money market funds, aims to broaden its horizons by supporting a diverse range of assets as collateral, including equities and fixed income.

Furthermore, the tokenization of assets as depicted in this transaction bypasses the tedious traditional channels, akin to directly using tokens in a vending machine instead of the usual cash. This analogy underscores the ease and speed that tokenization injects into the financial transaction landscape.

As JPMorgan’s TCN makes its debut with a successful live transaction, the stage is set for other financial institutions to follow suit.

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