JPMorgan analysts said Bitcoin’s bigger long-term risk may not be corporate selling of the token, but a quieter shift inside the financial system: the growing use of blockchain technology without public blockchains.
In a report led by Nikolaos Panigirtzoglou, the bank’s analysts said tokenization, payments and settlement activity could increasingly move to permissioned blockchain networks controlled by banks, central banks and regulated financial institutions. If that happens, activity on public networks such as Ethereum could slow, reducing liquidity and weakening one of the strongest arguments for broad crypto market growth.
The warning cuts against a common market narrative that focuses on immediate selling pressure, treasury decisions by public companies, or short-term flows into crypto products. JPMorgan’s view points to a deeper structural question: whether the future of blockchain-based finance will be built on open public networks, or inside closed systems run by established financial institutions.
The analysts said the risk to Bitcoin is indirect but important. Bitcoin may continue to trade as a store of value, a hedge against currency debasement, or a macro asset. But if the wider crypto economy loses activity because major institutions choose private systems, liquidity across public blockchains could decline. That would affect market depth, transaction demand and the overall role of open crypto networks in global finance.
Permissioned networks gain favor
The report said institutional blockchain projects are increasingly favoring permissioned infrastructure. These are closed or semi-closed systems where participants are approved, identified and governed by a known operator or group of operators.
That model differs sharply from public permissionless blockchains, where anyone can join, transact, validate activity or build applications without requiring approval from a central authority.
JPMorgan’s analysts said regulated financial institutions prefer permissioned systems for practical reasons. These include clearer governance, stronger data privacy, legal accountability, identity controls and easier regulatory oversight. In highly regulated markets, those features may matter more than the openness and decentralization offered by public networks.
The result could be a major divergence between blockchain adoption and crypto adoption. Banks and central banks may embrace blockchain-style ledgers, tokenized deposits and digital settlement tools while avoiding the public networks that helped create the crypto industry.
That distinction is critical. It means blockchain technology can grow, while public crypto networks see less benefit than many traders expect.
Public chains face a role change
The analysts said public blockchains such as Ethereum could see their role reduced in financial processes if tokenized assets, payment flows and settlement systems move into permissioned environments.
Ethereum is currently one of the main venues for tokenized real-world assets, stablecoins and decentralized finance activity. But JPMorgan’s report suggested that its future role in institutional finance may be more limited than its supporters expect.
Rather than serving as the core operational backbone for banks and market infrastructure providers, public chains may function more as distribution channels, access layers or interoperability bridges between separate systems. In that future, the most sensitive activity, including issuance, custody, compliance checks and final settlement, would occur inside controlled networks.
That would represent a major shift from the early crypto vision of open settlement rails replacing or competing directly with traditional financial infrastructure. Under the model described by JPMorgan, legacy finance would absorb some blockchain features while keeping control over the key parts of the system.
BIS concerns shape the debate
The report cited findings from the Bank for International Settlements, which has argued that systemically important financial systems are unlikely to rely on public, permissionless blockchains.
The BIS has raised concerns about scalability, compliance, settlement assurance and governance on open networks. For central banks and major financial institutions, the ability to reverse errors, identify participants, enforce rules and guarantee settlement outcomes remains central to market stability.
Instead of public chains, the BIS has supported the idea of permissioned “unified ledgers.” These systems could host tokenized central bank money, commercial bank deposits and securities within a regulated framework.
Such ledgers would allow different forms of money and assets to move on a shared infrastructure while remaining under official oversight. That model could make settlement faster and more efficient, but it would not necessarily increase activity on public crypto networks.
JPMorgan’s analysts said this direction could limit the market opportunity for permissionless networks, particularly if core financial assets migrate to regulated closed systems.
Tokenized deposits challenge stablecoins
One of the clearest examples of this shift is the development of tokenized bank deposits.
Tokenized deposits are digital representations of existing bank balances. Unlike many stablecoins, they are issued by regulated banks and remain tied to the current banking system. They may also benefit from existing deposit insurance, banking rules and legal protections.
Panigirtzoglou’s team said wider use of tokenized deposits could reduce institutional demand for stablecoins in settlement activity. If banks can move deposit money around the clock on approved blockchain networks, large institutions may have less need to rely on stablecoins issued outside the banking system.
That could reshape a major part of the crypto market. Stablecoins have become one of the most widely used tools in digital assets, serving as trading pairs, settlement instruments and dollar substitutes on public blockchains. But their role in regulated institutional settlement could come under pressure if bank-issued digital money becomes more widely available.
The analysts also pointed to blockchain initiatives by SWIFT and central banks working on digital currencies, including the digital euro and the digital yuan. These projects could give regulated institutions more control over blockchain-based transactions and reduce reliance on public stablecoins.
Real-world asset tokenization remains contested
The report also discussed tokenized real-world assets, a market that has grown quickly but remains small compared with traditional financial markets.
Tokenization refers to the creation of a digital representation of a real-world asset on a blockchain or distributed ledger. These assets can include U.S. Treasuries, money market funds, private credit, equities, bonds, commodities and fund shares.
JPMorgan’s analysts said tokenized real-world assets are currently worth about $50 billion, with much of the activity hosted on Ethereum. Other industry data has placed the market in a broader range, from roughly $33.5 billion to $60 billion in on-chain value, depending on how assets are counted. U.S. Treasuries have become one of the most developed categories, with about $15 billion tokenized across various platforms.
Even so, the analysts said much of the market remains experimental. Many projects are still pilots, limited deployments or early commercial products. The next stage may depend less on technical ability and more on legal structure, custody standards, compliance processes and the comfort level of large financial institutions.
JPMorgan’s report said future issuance, custody and settlement could migrate toward private networks offering higher standards of operational stability, identity verification and confidentiality. That could reduce the share of tokenized assets issued directly on public chains.
SWIFT and banks build new rails
The shift toward permissioned infrastructure is already visible in major financial projects.
SWIFT, the global financial messaging network, has been testing blockchain-style systems for cross-border payments and settlement using tokenized deposits and regulated digital assets. Major global banks have been involved in pilot programs designed to operate continuously, including outside normal banking hours, while preserving compliance and risk controls.
These initiatives are important because they show how traditional finance wants to modernize payment infrastructure without handing control to open crypto networks. A bank-led ledger can offer some of the speed and programmability associated with blockchain technology, while keeping access restricted to vetted participants.
Central banks are also advancing digital currency research. The digital euro remains under review, while China’s digital yuan is already one of the most advanced central bank digital currency projects. These systems are not designed like Bitcoin or Ethereum. They are state-backed, permissioned, and built around policy control.
For banks, the appeal is clear. A permissioned ledger can support faster settlement and tokenized money without exposing institutions to the operational, legal and compliance risks associated with public networks.
Settlement models may favor traditional finance
JPMorgan’s analysts also said regulated financial institutions may prefer deferred or netted settlement systems over atomic real-time settlement, which is common in public blockchain design.
Atomic settlement means that transactions settle instantly and completely, often with asset and payment legs exchanged at the same time. In crypto markets, this can reduce counterparty risk and make systems more transparent.
However, traditional finance often relies on netting and deferred settlement to manage liquidity and capital more efficiently. Banks and clearing houses do not always want every transaction to settle immediately on a gross basis. In many cases, they prefer to offset obligations before final settlement, reducing the amount of cash and collateral needed.
The analysts said this preference aligns better with existing financial management systems. As a result, public blockchains may not match the operational needs of large regulated institutions, even if they offer technical advantages in transparency and speed.
Market infrastructure projects point to controlled systems
The report cited several examples of financial infrastructure and tokenization projects using permissioned or controlled models.
The Depository Trust & Clearing Corporation has worked on tokenized asset workflows built on permissioned networks, with selective links to public blockchain systems such as Stellar. Other projects have used frameworks designed for institutional assets, including U.S. Treasuries, where compliance and settlement certainty are essential.
Securitize was mentioned as an example of a firm issuing tokenized assets on public chains such as Solana and Avalanche while applying regulated controls around participant eligibility and asset ownership.
These examples suggest that the market may not evolve in a purely public or purely private direction. Instead, many projects may use hybrid designs, where public chains provide reach and programmability while regulated layers control access, compliance and settlement finality.
Still, JPMorgan’s broader point is that the most valuable parts of institutional financial activity may not settle directly on permissionless ledgers.
Regulation could reshape stablecoin demand
The analysts said proposed legislation, including the Clarity Act, would not fully remove the concerns facing public blockchains.
Clearer digital asset rules could help crypto markets by reducing legal uncertainty. But such laws may also accelerate the development of bank-issued tokenized deposits and regulated digital money. If that happens, public stablecoins could face stronger competition in institutional use cases.
Stablecoins remain a major part of crypto activity, with market capitalization recently reaching record levels above $300 billion. They are widely used by traders for liquidity, collateral and settlement across digital asset venues.
But new rules in major markets are raising the bar for reserve quality, redemption rights, governance and operational controls. In Europe, the Markets in Crypto-Assets regulation has already pushed platforms to restrict or remove stablecoins that do not meet its requirements. In the United States, pending stablecoin regulation could favor issuers with strong banking links or direct regulatory oversight.
That does not mean stablecoins will disappear. They are likely to remain important in digital asset trading and emerging-market dollar access. But their role in institutional settlement may depend on whether they can compete with tokenized deposits issued by regulated banks.
Bitcoin may be partly insulated
Despite the broader warning, JPMorgan’s analysts said Bitcoin could be partly insulated from the trend if its trading continues to be driven by its role as a store of value or hedge against currency weakening.
Bitcoin does not depend heavily on tokenized deposits, real-world assets or institutional settlement systems for its core use case. Its appeal rests more on scarcity, decentralization, liquidity and its position as the largest cryptocurrency by market value.
That separates it from networks whose value depends more directly on financial applications, token issuance or transaction activity. If public blockchain use slows in tokenization and settlement, Ethereum and other smart-contract networks may face more direct pressure than Bitcoin.
However, the risk is not zero. Bitcoin liquidity is connected to the broader crypto market. If stablecoin demand weakens, public blockchain activity declines, or traders reduce exposure to digital assets as a sector, Bitcoin could still be affected.
The key issue is whether Bitcoin can continue to attract demand as a macro asset even if other parts of crypto lose momentum to permissioned systems.
A hybrid future remains possible
The report also allowed for a more balanced outcome.
Public blockchains may still play a major role if hybrid systems become common. In that model, regulated institutions could use private ledgers for compliance-heavy activity while connecting to public networks for distribution, liquidity or interoperability.
Strong regulatory support for stablecoins could also change the picture. If stablecoins receive clear legal status and wide acceptance in payments and settlement, they may continue to compete with tokenized deposits. Public networks could remain central if traders, fintech companies and asset managers prefer the openness and composability they provide.
The market is therefore moving toward a more complex structure rather than a simple victory for either public or private blockchains.
For traders, the central question is no longer whether banks will use blockchain technology. They already are. The more important question is where that activity will occur.
If it lands mainly on permissioned ledgers, public crypto networks may see less benefit from institutional adoption than expected. If it flows through public or hybrid systems, the link between traditional finance and open blockchains could strengthen.
JPMorgan’s report highlights that distinction as one of the most important issues facing the digital asset market. Blockchain adoption may continue to accelerate, but the winners may not automatically be the public networks that built the industry.
Curious how banks’ private chains challenge Bitcoin’s dominance? Explore evolving crypto adoption trends shaping public vs. permissioned blockchains.
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