JPMorgan says bitcoin's main risk isn't Strategy, but blockchain adoption that doesn't benefit public chains and tokens

Strategy's recent bitcoin sales and its formal BTC monetization program may be viewed by investors as a key risk to the crypto market, but that isn't the main risk for bitcoin, according to JPMorgan analysts.

Instead, the bigger threat comes from blockchain adoption that does not benefit public blockchains and their tokens, the analysts led by managing director Nikolaos Panigirtzoglou said in a report. If tokenization, payments, and settlement increasingly happen outside public crypto networks, the broader crypto ecosystem could face a "structural de-rating," see slower activity, lower liquidity, and weaker capital flows, eventually weighing on bitcoin (BTC).

"We do not see Strategy as the main structural threat to bitcoin," the analysts said. "In our view, the more important risk to bitcoin stems from the broader crypto ecosystem and from blockchain adoption within traditional finance continuing to develop in ways that bypass public permissionless networks."

Why blockchain adoption matters more

The analysts said 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.

"This creates a competitive threat for public blockchains such as Ethereum," the analysts said.

The analysts also 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. Instead, the BIS has promoted permissioned unified ledgers that combine tokenized central bank money, commercial bank deposits, and tokenized assets within regulated environments, the analysts noted.

Banks are building their own blockchain infrastructure, with tokenized deposits among the clearest examples, the analysts said. Tokenized deposits are digital representations of bank deposits backed by existing banking regulation, deposit insurance frameworks, and customer relationships.

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, the analysts warned. They added that 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 also said real-world asset, or RWA, tokenization may increasingly remain within traditional financial infrastructure rather than moving entirely onto public blockchains.

The tokenized RWA market is still relatively small at around $50 billion, with a meaningful share currently hosted on Ethereum. However, the analysts said 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 said. 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 also 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.

The analysts pointed to several examples already moving in that direction. DTCC is developing tokenization workflows on permissioned infrastructure while exploring selective connectivity with Stellar. It has also piloted tokenized U.S. Treasuries using ComposerX and Canton Network. Meanwhile, Securitize has issued tokenized assets on Solana and Avalanche through a regulated platform with eligibility controls.

"Permissioned networks anchor the regulated system and public chains are merely used for distribution and connectivity," the analysts said.

Clarity Act and what could prove JPMorgan wrong

Notably, the analysts said 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.

The analysts, however, 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.