While the recent growth of the stablecoin market capitalization is encouraging, the increasing dominance of Tether raises concerns, according to JPMorgan.

"Tether is mostly at risk given its lack of regulatory compliance and transparency," JPMorgan analysts led by Nikolaos Panigirtzoglou wrote in a report on Thursday. "We therefore view the increasing concentration in Tether over the past year as a negative for the stablecoin universe and the crypto ecosystem more broadly."

Stablecoin issuers face regulatory risk around the world, the analysts said. In the U.S., the approval of the Clarity for Payment Stablecoins Act is awaiting approval from Congress. Meanwhile, in Europe, there is an expectation of partial implementation of the Markets in Crypto Assets (MiCA) regulation in June of …