JPMorgan analysts led by managing director Nikolaos Panigirtzoglou identified blockchain adoption that bypasses public networks as the primary structural risk to bitcoin, according to a report from the bank. The analysts stated that Strategy's recent bitcoin sales are not the main threat to the crypto market. Instead, the greater risk stems from tokenization, payments, and settlement increasingly occurring outside public permissionless blockchains, which could lead to a structural de-rating of the broader crypto ecosystem with slower activity, lower liquidity, and weaker capital flows that eventually weigh on bitcoin. The analysts emphasized this concern as institutional adoption has largely favored permissioned blockchains due to their privacy controls, know-your-customer and anti-money laundering compliance, governance structures, and regulatory certainty.
Institutional Adoption Favors Permissioned Blockchains Over Public Networks
The JPMorgan analysts stated that institutional adoption has so far largely favored permissioned blockchains because they offer greater privacy, know-your-customer and anti-money laundering controls, governance, throughput, legal accountability and regulatory certainty. The analysts noted this creates a competitive threat for public blockchains such as Ethereum.
The analysts pointed to the Bank for International Settlements, which has warned against using public permissionless blockchains for systemically important financial infrastructure because of concerns around scalability, governance, legal accountability and settlement finality. The BIS has promoted permissioned unified ledgers that combine tokenized central bank money, commercial bank deposits, and tokenized assets within regulated environments, according to the analysts.
Banks are building their own blockchain infrastructure, with tokenized deposits among the clearest examples, the analysts stated. Tokenized deposits are digital representations of bank deposits backed by existing banking regulation, deposit insurance frameworks, and customer relationships. The analysts warned that if tokenized deposits become widely adopted, especially in non-transferable forms favored by regulators, they could reduce the need for stablecoins in institutional payments and settlement. SWIFT's blockchain initiative, along with central bank digital currency projects such as the digital euro and digital yuan, could further strengthen regulated alternatives, the analysts added.
Tokenized Deposits and RWA Markets Shift Toward Private Infrastructure
The analysts stated that real-world asset tokenization may increasingly remain within traditional financial infrastructure rather than moving entirely onto public blockchains. The tokenized RWA market is around $50 billion, with a meaningful share currently hosted on Ethereum, according to the report. However, the analysts stated that likely reflects early experimentation rather than the market's long-term structure.
As institutional adoption grows, issuance, custody, settlement and lifecycle management could increasingly take place on private or permissioned infrastructure that better meets institutional requirements around identity, confidentiality, governance and operational resilience, the analysts stated. Public blockchains may still be used for distribution, limited secondary trading, and interoperability, but could become less central to institutional processing over time, they added.
The JPMorgan analysts questioned whether public blockchain settlement is always the most efficient model for regulated institutions. While public blockchains enable atomic real-time settlement, deferred and netted settlement can reduce liquidity needs, improve capital efficiency, and better match how financial institutions manage funding and operations, according to the report.
The analysts pointed to DTCC developing tokenization workflows on permissioned infrastructure while exploring selective connectivity with Stellar. DTCC has also piloted tokenized U.S. Treasuries using ComposerX and Canton Network. Securitize has issued tokenized assets on Solana and Avalanche through a regulated platform with eligibility controls. The analysts stated that permissioned networks anchor the regulated system and public chains are merely used for distribution and connectivity.
Clarity Act May Not Eliminate Structural Risks to Bitcoin
The analysts stated that even if the Clarity Act is approved later this year, it may not eliminate these risks. While the legislation could provide greater regulatory clarity for digital assets, it could also encourage the development of bank-issued tokenized deposits, strengthening incumbent financial institutions while limiting the role of public blockchain-based stablecoins, according to the report.
The analysts noted that several developments could challenge their outlook. Those include a hybrid model where public and private blockchains both play important roles, stronger stablecoin adoption supported by favorable regulation, or bitcoin continuing to trade primarily as digital gold or a hedge against currency debasement regardless of how value accrues across the broader crypto ecosystem.
FAQ
What does JPMorgan identify as the main risk to bitcoin?
JPMorgan analysts identified blockchain adoption that bypasses public permissionless networks as the primary structural risk to bitcoin. The analysts stated that tokenization, payments, and settlement increasingly occurring outside public blockchains could lead to a structural de-rating of the broader crypto ecosystem with slower activity, lower liquidity, and weaker capital flows.
Why do institutions favor permissioned blockchains over public networks?
According to the JPMorgan report, institutional adoption has largely favored permissioned blockchains because they offer greater privacy, know-your-customer and anti-money laundering controls, governance, throughput, legal accountability and regulatory certainty. The Bank for International Settlements has warned against using public permissionless blockchains for systemically important financial infrastructure due to concerns around scalability, governance, legal accountability and settlement finality.
How large is the tokenized real-world asset market?
The JPMorgan analysts stated the tokenized RWA market is around $50 billion, with a meaningful share currently hosted on Ethereum. However, the analysts noted this likely reflects early experimentation rather than the market's long-term structure, as institutional adoption grows toward private or permissioned infrastructure.
