JPMorgan Analysts Warn of Structural Downgrade Risks for Public Chains
JPMorgan's analyst team pointed out that the Strategy Bitcoin selling plan is viewed by the market as a crypto risk, but the more fundamental threat comes from the shift towards permissioned infrastructure for tokenization, payments, and settlements that do not require public chains.
Institutions show a clear preference for permissioned chains due to their advantages in privacy, KYC/AML, governance, throughput, and regulatory certainty, posing direct competition to public chains like Ethereum. In the approximately $50 billion tokenization market for real-world assets, Ethereum's current share reflects more of an early experimental phase.
If tokenized deposits are widely adopted and exist in a non-transferable form, it will weaken the demand for stablecoin institutions; the SWIFT blockchain initiative and CBDC projects like the digital euro and digital yuan further reinforce regulated alternatives, leading to a decline in public chain transaction activity, liquidity, and capital inflows.
Source: Public Information
ABAB AI Insight
JPMorgan has long tracked the intersection of traditional finance and crypto, previously releasing reports emphasizing institutional preferences for permissioned chains over public chains, similar to the path of bank-led blockchain alliances (like R3 Corda) attempting to dominate enterprise applications between 2018-2020. The analyst team continues to focus on the structural advantages of permissioned infrastructure in compliance and operations, repeatedly pointing out the inherent shortcomings of public chains in KYC and legal accountability over the past few years.
In terms of capital pathways, large financial institutions are concentrating resources on permissioned chains and CBDC projects, leveraging existing networks like SWIFT to drive settlement flows, motivated by the desire to retain control over privacy, governance, and regulation while avoiding the risks associated with the volatility and transparency of public chains. This directly leads to funds and trading activities bypassing public networks like Ethereum, prioritizing institutional demands for confidentiality and operational resilience.
Compared to the early dominance of Ethereum in DeFi and RWA experiments, the current phase resembles the traditional finance migration from public markets to over-the-counter and customized infrastructures. Public chains are still in an early distribution role, but as institutional adoption scales, they face pressure to be marginalized into a "limited secondary trading" layer.
Essentially, this is a restructuring of the industry chain: traditional finance is regaining control over the issuance, custody, and settlement of tokenized assets through permissioned infrastructure, balancing regulatory certainty with compliance costs, leading to the systematic replacement of pricing power and capital inflows in public permissionless networks, triggering a structural downgrade of the entire crypto ecosystem.
ABAB News · Cognitive Law
When regulatory certainty surpasses past centralized commitments, capital will always choose chains it can control over public chains.
Early shares do not equal long-term structure; institutional adoption will downgrade public chains from infrastructure to distribution channels.
Liquidity and pricing power follow control; the permissioned path bypassing public chains is the true systemic risk in the crypto market.