How the mighty have taken a u-turn.
J.P. Morgan Chase CEO Jamie Dimon called bitcoin a fraud in September 2017 and said, “You can’t have a business where people can invent a currency out of thin air and think that people who are buying it are really smart,” By January 2018 he had walked the remarks back but said he still was “not interested that much in the subject at all.” In February 2018, J.P. Morgan called cryptocurrencies “risk factors” to its business, something it never previously said.
And now J.P. Morgan (JPM) has become the first bank to offer its own cryptocurrency, CNBC reported. But don’t expect it to become an investment vehicle—at least for now. The cryptocurrency, called “JPM Coin,” is intended for the bank’s wholesale payments business that moves $6 trillion around the world daily.
As long-time former banker and now cryptocurrency industry figure Alan Silbert said of Dimon in a January 2018 tweet, “Backpedaling is the first step in the program towards walking the path.”
There are two reasons J.P. Morgan is on that road. One is strategic. If cryptocurrencies are risk factors, it’s better to be inside than out, potentially watching someone walk away with your business.
The second is competitive. Wholesale cross-border payments involve the movement of large sums between banks as part of the complex dance of international transactions. Those movements have traditionally used wire transfers that can take a day to complete.
But global banking is moving toward blockchain, the database technology that drives cryptocurrencies and leaves a clear audit trail that supports a high level of regulatory compliance. A cryptocurrency can work at the same speed for real-time transactions instead of a wire transfer’s lag, giving the processor a competitive advantage.
Small trials of JPM Coin are expected to start within a few months.