Despite JPMorgan Chase CEO Jamie Dimon having called Bitcoin a “fraud,” the big bank is now taking cryptocurrency very seriously—acknowledging the blockchain-based technology as a veritable threat to its future.
In JPMorgan Chase’s annual report, released Tuesday afternoon, the bank counted cryptocurrencies such as Bitcoin and Ethereum as “risk factors” to its business for the first time, recognizing the digital currencies as new forms of competition that could, quite literally, give the bank a run for its money.
“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,” the bank (JPM) wrote in the report.
Already, the bank added, new technologies have required the company to invest in adapting or modifying its products to draw and retain customers, and to compete with new offerings from tech upstarts, a trend it expects to continue. “Ongoing or increased competition may put downward pressure on prices and fees for JPMorgan Chase’s products and services or may cause JPMorgan Chase to lose market share,” according to the report.
The bank’s disclosure follows a similar admission by rival Bank of America (BAC) in its own annual report last week. In that filing, Bank of America noted the potential risk of customers leaving for competitors offering products and services “in areas we deem speculative or risky, such as cryptocurrencies.”
A spokesperson for JPMorgan Chase declined to comment on why the company chose to add cryptocurrency to its risk factors now. But the bank has shown an increasing appreciation for the transformative potential of both blockchain technology—becoming one of the first to spearhead the development of its own Ethereum-based blockchain—and the cryptocurrencies based on it. Earlier this month, for example, Umar Farooq, JPMorgan Chase’s head of blockchain initiatives, offered a peek into the rapid and enthusiastic uptake of the technology inside the bank.
“It’s more than thriving. People have been surprised how quickly it basically spread as a way to address and think about customers differently,” Farooq said at the Yahoo Finance All Markets Summit in New York on Feb. 7. “It’s quite insane.”
The following week, JPMorgan Chase released a 71-page research report that became known as the “Bitcoin bible” because of its thorough analysis and exploration of a broad spectrum of issues surrounding the dominant cryptocurrency, as well as others such as Ripple. Assessing banks’ current blockchain and cryptocurrency ventures, the bank’s analysts concluded, “Opportunities for banks to utilize blockchain technologies for conducting business could have far-reaching implications for the sector in our view.”