Here's why Jamie Dimon's comments on Bitcoin as "a fraud" are perplexing.
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J.P. Morgan CEO Jamie Dimon lit the Internet on fire yesterday after his comments on Bitcoin suggested the cryptocurrency is “a fraud” and that he would fire any employee trading bitcoin for being “stupid.”
At a CNBC/Institutional Investor Delivering Alpha conference, Dimon argued that governments will eventually crack down on digital currencies because cryptocurrency is being used for illicit purposes. This is not the first time he’s gone on a tirade about cryptocurrency. In 2015, Dimon attended Fortune’s Global Forum conference where he told attendees they were “You’re wasting your time” with Bitcoin.
This is only interesting (and perplexing) because:
• Dimon’s company was one of 86 corporate firms to play a role in forming The Enterprise Ethereum Alliance, an open-source blockchain initiative. The idea of the EEA is for big banks and tech companies to come together and build business-ready versions of the software behind Ethereum, a decentralized computing network based on digital currency.
• At yesterday’s conference, Dimon was careful to distinguish between cryptocurrencies and the blockchain because, well, J.P. Morgan has actually built its own blockchain on top of Ethereum.
• Remember when J.P. Morgan tried to patent a Bitcoin-style payment system? Although the patent was reportedly rejected, it’s fascinating to see the bank lay out some of the problems with the existing payment structure. For instance, “Furthermore, to date, there is no efficient way for consumers to make payments to other consumers using the Internet. All traditional forms of person-to-person exchange include the physical exchange of cash or checks rather than a real-time digital exchange of value. In addition, the high cost of retail wire transfers (i.e., Western Union) is cost prohibitive to a significant portion of society.”In 2014, Dimon told CNBC that Bitcoin is “a terrible store of value. It could be replicated over and over.” Unfortunately for J.P. Morgan, it didn’t quite work out.
• My favorite twist to all of this is that while Dimon was bashing Bitcoin, J.P. Morgan’s Chief Economist Michael Vaknin was hosting panelists from Blockchain Capital, Pantera Capital, Boost VC, and Polychain Capital. Not awkward AT ALL. J.P. Morgan’s own blockchain program lead tweeted a ¯_(ツ)_/¯ in response to Dimon’s comments. And JPM’s former global trading macro head offered the less politically-correct, “Jamie, you’re a great boss and the GOAT bank CEO. You’re not a trader or tech entrepreneur. Please, STFU about trading $BTC.”
Taking the drama up another notch, Social Capital CEO Chamath Palihapitiya spoke at the same conference and immediately refuted Dimon’s earlier remarks. He said “the genie is fundamentally out of the bottle,” adding that he’s been “massively long Bitcoin” since 2012-13.
To wrap this up, I’ll leave you with a few thoughts. I do think Bitcoin and other cryptocurrencies have the potential to fundamentally reshape global finance. And unfortunately, many will undoubtedly get burned along the way as a result of entrepreneurs/investors who abuse the lack of regulations around ICOs. As Peter Smith, the CEO of Blockchain, said at Fortune’s Brainstorm Tech conference in July, “We’re cautious about it in the short term. But you have to temper that with the idea that every new technology is going to be like that in the beginning.”