When the Fed rides the brakes, money moves to code. The banks know it.
Jamie Dimon says inflation is stuck at 3%, the Fed is split, and more cuts may be a mirage. At the same time, his bank is laying track for tokenized money while trade groups push Congress to kneecap stablecoins.
High rates are turbocharging the very stablecoin shift banks are trying to strangle.
The real fight is not are stablecoins allowed. It is the GENIUS Act’s narrow ban on issuers paying interest and the gap it leaves for intermediaries to pay rewards. That is where the knives are out.
Call it the Dimon Paradox. In public, incumbents play it down. In private, they copy the tech and try to own the rails. Tokenized deposits. Permissioned networks. Custody. Underwriting. Containment for show, control for keeps.
September’s move was a wrist tap, not a pivot. The target range slipped 25 basis points to 4.00% to 4.25%. Seven of nineteen officials signaled no more cuts this year.
St. Louis’s Musalem warns there is limited room to ease. Atlanta’s Bostic wants one and done. Stephen Miran dissented for a larger cut and says policy is roughly two points too tight.
Dimon’s macro frame is blunt: deficits, remilitarization, rewired trade, a tighter labor market as immigration slows, and tariffs that add roughly half a point to 2025 inflation. The economy is weakening, not collapsing. No case for rescue cuts.
Banks push one nightmare. Yield on stablecoins sparks a deposit exodus of about $6.6 trillion. They point to the 1980s, when savers bolted capped bank rates for money-market funds.
The spread is the story. Average savings accounts pay around 0.6 percent. Stablecoin platforms dangle up to 5 percent. Money does not need a lecture. It needs a button.
The rebuttal bites. Today’s dominant use is payments plumbing with instant settlement that can be up to 13 times cheaper than legacy rails. Banks are parked on roughly $3.3 trillion at the Fed and collect about $176 billion risk free. Lending is not starved. Margins are protected.
Look at the curve. Stablecoins grew from roughly $4 billion in 2020 to about $285 billion by mid 2025. On-chain volume hit $8.9 trillion in the first half of 2025. Projections show $1 trillion in annual payments by 2030.
That is why the lobbyists are sweating.
Give the bankers their best shot. If stablecoins can pay yield, deposits migrate, funding costs rise, credit tightens. We have seen a version of this with Regulation Q. They want GENIUS tightened to stop the replay.
Fair. The arbitrage is real. The money-market analogy is not crazy. Keep the spread and the flow continues.
Now the rest of the record. The center of gravity is payments, not savings. Community-bank deposit flight has not tracked stablecoin uptake in recent years. Banks are not short of lendable funds while they earn on reserves.
GENIUS already forces one-to-one cash and Treasury bills, plus AML and BSA oversight. This is regulated money, not a free-for-all.
The so-called loophole is a legal design choice. Issuers cannot pay interest. Intermediaries claim they can pay rewards. That is the line of scrimmage.
Dimon shrugs at the idea that stablecoins threaten deposits. Blockchain is real. The froth is not. He warns the Fed may be boxed in by sticky inflation. He delivered the lines at JPMorgan’s India Investor Conference while hawks at the Fed talked tough.
Inside the building, the story changes. JPMD deposit tokens. A permissioned network now called Kinexys, formerly JPM Coin, moving more than $2 billion a day. Custody and treasury services for digital dollars. Underwriting roles in the public stablecoin ecosystem.
The bank plans to ride both tracks because that is where the clients are headed.
First, we are not the issuer. And second, we do not pay interest… we pay rewards.
That is the intermediary workaround that keeps the lobby awake.
Policy and plumbing just collided. Higher for longer widens the yield gap. Money shifts to faster, cheaper rails that undercut the old tollbooths. Lobbyists shout stability, but the incentives are simple. Corporate treasurers will not pay card-network rents when programmable dollars settle instantly for less.
GENIUS locks in reserves and licensing and still leaves intermediaries room to compete. The real game is control of the network. Open stablecoins or bank-walled tokens.
Second-order effects are already visible. Payment margins compress. Liquidity fragments between closed and open systems. Congress feels pressure to pick winners by swapping one word and redefining interest so rewards no longer slip through.
Stop calling this crypto versus banks. It is protocol versus platform control.
A hybrid future looks likely. Tokenized deposits for institutions. Public stablecoins for open commerce. Banks monetizing the bridges.
I have two law degrees and I barely understand what this is about. While I minored in economics and understand that money and loaning can get complicated, this seems too complicated. I cannot image that we are building more server centers so we can make up a new form of digital money that is not the dollar while contributing to climate change on steroids but here we are. I'm sure I am pretty lost in this conversation but I am glad you are on top of it even if I can barely break through your jargon.