JPMorgan and Crypto: A never-ending love and hate relationship
As it is with most financial instruments, cryptocurrencies arrived with a lot of apprehension from all over the world. While some institutions have been open and accepting, others like JPMorgan have taken a rather different stance. Let’s look at the interesting relationship JPMorgan has had with cryptocurrencies over the years.
November 2016 – JP Morgan Developed Quorum
JPMorgan published a paper in November 2016 for Quorum, a private blockchain platform developed by them using the Ethereum protocol.
Being a founding member of EEA (Enterprise Ethereum Alliance), JPMorgan developed Quorum in accordance with the mandate of EEA to bring scalability, security, and privacy to the Ethereum blockchain. It was aimed at organizations that wanted to have better control over the use and accessibility of data through blockchain.
Quorum protects sensitive information using cryptography and allows only authorized users to access specific transaction data. And about 18 months later, in April 2018, JPMorgan tested their Quorum blockchain with several participant banks.
September 2017 – Jamie Dimon Gets Skeptical over Cryptocurrency
While JPMorgan, as a company, hasn’t been especially hostile towards cryptocurrencies, their CEO Jamie Dimon has been extremely critical of crypto in general and Bitcoin in particular.
Dimon didn’t only call the whole thing a fraud, but he boldly stated that if he saw any of his traders dealing in Bitcoin, he’d “fire them in a second” because cryptocurrency trading is against the rules and “stupid.”
According to Dimon, “It’s worse than tulip bulbs. It won’t end well. Someone is going to get killed.”
After Dimon expressed his distrust of crypto in September, Bitcoin went down 2 percent and traded at $4,106.23.However, a few days later it surpassed the $8,000 mark for the first time, proving that investors didn’t care about Dimon’s statement for long.
JPMorgan (like other banks such as Goldman Sachs, Bank of America, and Morgan Stanley) offers its customers access to CME markets using their futures brokerage services.
The difference is – only JPMorgan has a CEO who has been hypercritical of Bitcoin.
February 2018 – Flip-flop Attitude
As cryptocurrencies stood humbled after Bitcoin hit its all-time high in December 2017, some banks (including JPMorgan) stopped processing crypto purchases with their credit cards, blaming it on the market volatility.
As February came to an end, JPMorgan delivered the annual report to the US SEC (Security and Exchange Commission). The report mentioned that cryptocurrencies were risk factors and illustrated their disruptive aspects.
In the report the organization elaborated on the fact that the rise of cryptocurrencies will make banks spend more money to adapt their products to appease customers, thus losing market share in the process.
“Both financial institutions and their non-banking competitors face the risk that payment processing and other services could be disrupted by technologies, such as cryptocurrencies, that require no intermediation.”
May 2018 – Creating Crypto Strategies
JPMorgan announced in May that they are looking for someone as the leader of a crypto assets strategy. The vacancy was soon filled by Oli Harris, who currently handles the organization’s cryptocurrency projects.
Harris’ responsibilities do not include trading crypto but instead, they’re about examining the use of blockchain and cryptocurrencies and creating strategies to benefit JPMorgan’s processes.
August 2018 – Jamie Dimon gets Critical of Bitcoin – Again
Jamie Dimon expressed his concerns about Bitcoin again last month saying that the cryptocurrency market is a scam and he’s not interested in it.
Discussing the economic outlook of the US at the 25th Annual Summer Celebration Gala of Aspen Institute, Dimon returned to Bitcoin bashing, reiterating the comments he made last year. Dimon made it clear that according to him, the world’s largest online currency is a scam. He also suggested that governments might want to shut down cryptocurrencies because the authorities are unable to control these new financial instruments.
August 2018 – Jamie Dimon Changed his Stance on Bitcoin
As the Harvard Business Review spoke to Dimon in August, the latter said that JPMorgan was in the process of testing the blockchain technology as it can be used for several applications in the organization.
He refrained from talking about cryptocurrency but showed his trust in the blockchain. According to Dimon, “I probably shouldn’t say any more about cryptocurrency. But it’s not the same as gold or fiat currencies. Those are supported by the law, police, and the courts. They’re not replicable, and there are strictures on them. Blockchain, on the other hand, is real. We’re testing it and will use it for a whole lot of things.”
Changing Perceptions
With so many changed stances, it was difficult to predict what JPMorgan actually thinks of cryptocurrency. With the recent statements by JPMorgan CIO Lori Beer, things have become clearer, and it has helped the users understand the company’s view on the blockchain.
In August 2018, Beer speculated that blockchain technology would soon replace existing financial instruments.
According to Beer, the organization needs to create a stable blockchain platform that can fulfill the needs of the company as well as those of their clients.
Beer said, “We are currently following many paths. We invented a blockchain with an open code based on Ethereum. Actual blockchain technology has not yet resolved issues with privacy and scalability that we needed. We are connected to Hyperledger and Enterprise Ethereum Alliance. The application of this technology in business is more important to us than the technology itself. We are looking not only for cost reduction but also for opportunities to develop new products.”
She also said that the organization is presently evaluating the crypto space, making it clear that they would support only regulated currencies and markets.
While this doesn’t help the company get any closer to active participation in the cryptocurrency markets, their interest in blockchain development does give a little more faith to the users about the promise that blockchain has for the world of finance.
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