The chief of the largest bank in the US comprehensively dissed Bitcoin last Thursday.
In a CNBC interview, JPMorgan Chase chairman and CEO Jamie Dimon dismissed the polarizing virtual currency, calling it a “terrible store of value.” Since each iteration is arbitrary, cryptocurrencies “could be replicated over and over,” he said. To one of the Street’s most prominent leaders, the existence of Dogecoin and Coinye West is simply further evidence that Bitcoin can’t be taken seriously.
The Wall Street honcho also made sure to remind everyone of Bitcoin’s subversive qualities.
"It doesn't have the standing of a government and honestly, a lot of it—what I've read from you guys—a lot of it is being used for illicit purposes,” he said. “And people who will get upset with it is governments. Governments put a huge amount of pressure on banks: know who your client is, did you do real reviews of that. Obviously it's almost impossible to do with something like that.”
Dimon—who is also on the board of directors of the New York Federal Reserve—famously and expertly navigated the nearly century and a half old investment bank profitably through the treacherous waters of the one of the worst financial crises since the Great Depression. When Bear Stearns imploded in 2008, it was Dimon and co. who swooped in and bought the ailing investment bank, preventing its total collapse. And JPMorgan Chase would be one of the first banks to return federal bailout funds—known as the Troubled Asset Relief Program or TARP.
Under Dimon’s stewardship, JPMorgan Chase has become the leading bank in the US, with the most domestic assets under management, the second largest market capitalization (behind Wells Fargo), and the country’s number one general purpose credit card provider by market share. Institutional Investor named Dimon CEO of the year in 2011.
As top dog of the incumbent banking elite, Dimon is authoritatively cynical regarding the future of digital finance.
"The people who are going to eventually really get upset with it will be governments," said Dimon, who argues that the inevitable arrival of strict regulations “will be probably be the end of [Bitcoin and other cryptocurrencies].”
But as a man who’s clearly well versed in the many modes of money, Dimon’s Bitcoin analysis is at best basic and superficial and at worst stale and misleading. None of his arguments are particularly fresh and all of them can be logically addressed.
Bitcoin is a terrible store of value: As a burgeoning, experimental currency, Bitcoin is volatile, but price stability will continue to increase, as it has, along with adoption and expansion of the ecosystem.
Cryptocurrency replication and the rise of “altcoins”: Crypto-coin diversity isn’t really an argument for why Bitcoin or cryptocurrencies as a whole will fail. If anything, the popularity of altcoins like Dogecoin and Coinye West has only increased awareness and subsequently could be viewed as educational tools. There is also the possibility that the Bitcoin protocol model will be used for services beyond money like decentralized DNS, RSS, or email. And meanwhile, altcoins totally unique of BTC will continue to be developed like the Ripple protocol, which is a distributed platform for all forms of value.
Bitcoin is used for illicit purposes: Going by that logic, anything can be used for illicit purposes, including the banks themselves. Dimon's bank settled with regulators over charges of deficient money-laundering controls.
Government regulations will end Bitcoin: Rather than doom cryptocurrencies, regulations provide the movement with an air of legitimacy allowing established corporations to comfortably incorporate them into their businesses. Moreover, since these technologies allow non-bank companies to offer bank-like services, increased competition means the consumer ultimately wins. It’s no secret then that Silicon Valley loves Bitcoin.
Why then has Dimon offered such weak arguments?
It’s possible that Dimon doesn’t fully comprehend the implications of potentially revolutionary technology, which, despite his credentials, isn’t necessarily a surprise. Most people have yet to wrap their heads around what Bitcoin truly represents.
As such, Dimon’s view is hardly unique and his apparent “incredulity” is shared by Treasury Secretary Jack Lew.
"From the government's perspective, we have to make sure [Bitcoin] does not become avenue to funding illegal activities or to funding activities that have malign purposes like terrorist activities," Lew told CNBC in an interview at the World Economic Forum in Davos, Switzerland. "It is an anonymous form of transaction. And it offers places for people to hide."
Also possible is that Dimon views Bitcoin as a threat, a figurative drawbridge allowing outsiders to cross the moat into Wall Street’s long-fortified kingdom. If so, Dimon’s confident negative slant is only natural. In fact, JPMorgan Chase was recently awarded a patent for a digital payment system that could rival Bitcoin.
The alignment of such interests have led some to question how seriously Dimon’s views should be taken including Erik Vorhees, the prominent Bitcoin insider who created the infamous Satoshi Dice and is currently the co-founder of Coinapult, a Panama-based startup that allows people to send bitcoins to email addresses or mobile numbers.
— Erik Voorhees (@ErikVoorhees) January 23, 2014
At the very least, the JPMorgan Chase patent shows that the banking industry is well aware of the need for monetary innovation. Whether or not the future involves Bitcoin or something else or is borne from Wall Street or Silicon Valley remains uncertain, but it’s becoming clearer than ever that whatever is next will live seamlessly in our increasingly digital reality.