JPMorgan warns private blockchains could sap public crypto

JPMorgan warned that a shift by banks and market utilities to private, permissioned blockchains could divert trading activity, liquidity and capital away from public-chain crypto networks. The bank said tokenizing deposits, payments and settlement inside institution-controlled ledgers would reduce the need for public-chain settlement, fee markets and on-chain liquidity.

JPMorgan noted that if tokenized deposits and securities settle within bank infrastructure, much trading volume and custody demand would not touch public networks. The bank highlighted the scale of existing U.S. market infrastructure: the Depository Trust Company custodizes more than $114 trillion in assets, and DTCC subsidiaries processed about $4.7 quadrillion in securities transactions in 2025.

Several large market projects are advancing. A new blockchain ledger run by a global payments group will begin live tests of tokenized deposit payments with 17 banks across six continents, including Citi, HSBC, Standard Chartered, UBS, Wells Fargo and Itaú Unibanco, aiming to support round-the-clock transfers. The Depository Trust & Clearing Corporation reported that more than 50 firms, including large asset managers and broker-dealers, joined its tokenization working group; limited production trades are planned for July 2026 with a full launch scheduled for October 2026.

Independent forecasts for tokenization vary. One major bank’s Tokenization 2030 report projects a base-case tokenized-asset market of about $5.5 trillion by 2030, with a low case near $2.7 trillion and a high case around $8.2 trillion. The Bank for International Settlements noted that private permissioned networks can meet regulatory and governance requirements but may create walled gardens that limit competition and innovation.

Data points in the market include a $311.9 billion stablecoin market capitalization and roughly $14.9 billion in tokenized U.S. Treasuries, compared with a roughly $30 trillion Treasury market. A large spot Bitcoin ETF held about $45.6 billion in net assets as of July 8 while showing a year-to-date net asset value return near -28.9%.

JPMorgan set out three scenarios. In a bull scenario, tokenization grows toward higher forecasts while access remains gated and reversible, reducing some settlement demand for public-chain tokens. In a bear scenario, ETF outflows and risk-off markets reinforce a narrative of institutional control over infrastructure and weigh on public-chain tokens. In a base scenario, tokenized rails and public chains coexist, with some activity shifting to permissioned systems while Bitcoin remains an allocation option whose price depends on flows and macro conditions.

The bank also flagged risks for Bitcoin, noting its volatility has been about four times that of global equities over the past decade and estimating that a 5% Bitcoin allocation would add roughly 13% to portfolio risk versus about 2% for a comparable gold position. Industry participants are preparing for potential quantum-computing threats to cryptographic protections and the implications for digital-asset security.