Jamie Dimon has criticized cryptocurrencies for years. Now, the JPMorgan Chase CEO says he doesn’t even consider them real currencies.
During an interview with Kathimerini, a Greek financial and political news daily, one of Wall Street’s most prominent CEOs made several disparaging remarks about cryptocurrencies. “While the valuation is there,” Dimon said, “personally, I don’t understand them.”
Dimon emphasized that he doesn’t consider crypto akin to a real currency, and he laid out three specific reasons.
“I don’t call them cryptocurrencies, I call them crypto-tokens, because currencies have rules of law behind them, central banks, and tax authorities,” Dimon said.
So does Dimon have a point?
What is a currency, anyway?
Dimon’s argument about the three things that cryptocurrencies lack certainly makes sense. Cryptocurrencies are very different from hard currencies backed by central banks, like the U.S. dollar, which are known as fiat money and have been made legal tender by government decree. They are also issued by a central bank or governmental institution and subject to tax authorities.
Fiat money is one type of currency, but by definition, a currency can be anything that circulates as a recognized medium of exchange. For most of recorded history, humans have traded and bargained with commodities that were not issued or approved by central banks. People agreed that they were worth something. Cryptocurrency is a modern spin on that.
But even though crypto is being used in some transactions, its overall use value, like Dimon says, is still quite slim. Dimon has criticized cryptocurrencies like Bitcoin in the past for “having no intrinsic value,” and while intrinsic value is a slippery concept (arguably nothing has intrinsic value, but rather humans attach value to different things at different times), it would be very difficult to rely exclusively on cryptocurrency in today’s economy.
For now, the main utility of cryptocurrency is still as something to be exchanged for fiat money. The opportunities to spend cryptocurrency are still scarce relative to spending dollars, euros, and yuan.
“There’s been a lot of people who have sat in the crypto world who’ve said, ‘Oh, crypto is going to take over the world and traditional banks and central banks will go away.’ That’s not going to happen.” Julian Sawyer, CEO of crypto exchange platform Bitstamp, told Bloomberg last June.
Dimon has hardly refrained from admonishing crypto in the past, unafraid to call Bitcoin “worthless” and “a fraud.” His ongoing feud with cryptocurrency goes as far back as 2017, when the banker likened it to a financial bubble primed to blow sooner or later because of its lack of governmental and legal support.
In his interview with Kathimerini, Dimon urged people interested in cryptocurrency investments to be cautious. “I think people need to be careful,” he said, “you’ve seen that in the last couple of months they have lost half their value in the US market.”
Crypto is indeed plunging. The price of leading currencies Bitcoin and Ethereum has dropped over 40% since last November, the latest sign of crypto’s inescapable volatility.
JPMorgan declined to provide further comment.
