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In February 2019, JPMorgan Chase became the first US bank to roll out a bank-backed cryptocurrency with the aim of transforming business payments.
JPMorgan has a bizarre and confusing relationship with cryptocurrency. After learning that they have launched their own crypto coin (JPM Coin), you could assume that they are enthusiasts of cryptocurrency; however, that hasn’t always been the case.
In 2015, JPMorgan CEO Jamie Dimon responded to a question about the potential for a decentralized economy of cryptocurrency, saying:
“It’s just not gonna happen, you’re wasting your time. This is my personal opinion. There will be no real non-controlled currency in the world. There’s no government that’s gonna put up with it for long.”
His opinion appeared to strengthen as time went on. In September 2017, Dimon was speaking at an investor conference in New York and decided to share his opinion on Bitcoin. His opinions on Bitcoin were strongly worded and extremely critical, and ultimately ended up making him famous for his Bitcoin criticism.
Dimon called Bitcoin a “fraud” that’s “worse than tulip bulbs”. He also added that he would fire any employees found to be trading Bitcoin “in a second” because they are “stupid.” These statements caused a stir in the cryptocurrency industry, understandably angering crypto enthusiasts. The statements are so strongly worded and passionate that perhaps they came as a shock to the people hearing them. They read more like someone on a rant at a dinner party than the CEO of a major bank’s public opinion.
Continuing, Dimon said:
“If you were in Venezuela or Ecuador or North Korea or a bunch of parts like that, or if you were a drug dealer, a murderer, stuff like that, you are better off doing it in Bitcoin than US dollars.”
Bloomberg also reported that Dimon suggested that governments “may move to shut down the currencies [cryptocurrency], because of an inability to control them.” By January of 2018, Jamie Dimon seemed to have softened his attitude towards the world’s most popular cryptocurrency saying he regretted calling Bitcoin a “fraud”.
From what we can gather from Dimon’s statements, he is against a decentralized cryptocurrency that is not government backed; however, he does support the technology that underpins it, saying “the blockchain is real.”. It was in this interview in the July-August issue of the Harvard Business Review that Dimon called blockchain real, and said that JPMorgan was “testing [blockchain] and will use it for a lot of things.” Some accused Dimon of implying that cryptocurrency is not real during his statements.
JPMorgan’s attitude towards cryptocurrency began to soften from this point. By May 2019, JPMorgan’s co-president Daniel Pinto told CNBC that cryptocurrencies “are real but not in the current form,” and admitted that the banking giant were looking into it.
So, what exactly is JPM Coin?
JPM Coin is a stablecoin and the first dollar-backed cryptocurrency from a major bank. JPM Coin is a digital asset that runs on top of Quorum, JPMorgan’s private Ethereum-based ecosystem. Each virtual coin is redeemable for one USD, making it much less volatile than other cryptocurrencies such as Bitcoin. This would fall under the definition of “stablecoin”; however, JPMorgan has contested this, saying JPM Coin is not a stablecoin.
JPMorgan explained why the digital coin isn’t a stablecoin by saying:
“In case of some stablecoins (e.g., USDC) only exchange customers can mint (buy with US$) or redeem (sell for US$) stablecoins but anyone can own or trade them.”
The digital coin can only be used inside JPMorgan for the money transfers between lenders and clients as a faster alternative to wire transfer. Therefore, JP Coin isn’t available for anyone to own or trade.
So, if JPM Coin will only be used by a tiny percent of JPMorgan’s client base in order to facilitate international payments from large corporations, and it operates privately, then is it actually a cryptocurrency in the true sense of the word?
Is JPM Coin a cryptocurrency?
The JPM Coin has been met with criticism from the beginning, with many crypto-industry leaders blasting it for essentially not being a cryptocurrency.
“In which way has the new alleged JPMorgan crypto coin anything to do with blockchain/crypto? It is private not public, permissioned not permissionless, based on trusted authorities verifying transaction not trustless, centralized not decentralized. Calling it crypto is a joke”
So why do many people in the crypto industry not consider JPM Coin a cryptocurrency? One of the main features of cryptocurrency is its decentralized nature, and JPM Coin is lacking in this area. The JPM Coin is completely centralized – the trust in the system comes from JPMorgan and the virtual coins’ value is based on reserves held within the bank.
Jerry Brito who is executive director at Coin Center, a nonprofit cryptocurrency and decentralized technology research group, said:
“There’s a lot of confusion…I see folks referring to it as a cryptocurrency. It’s not a cryptocurrency. A cryptocurrency is one that is open and permissionless, if you want to download it, you don’t need permission; you just need some software.”
Is Jamie Dimon flip-flopping on cryptocurrencies?
Many people have argued that Dimon’s strongly worded criticisms of Bitcoin are at odds with his later actions of spinning out their own crypto coin and it is easy to see why. Listening to Dimon’s statements would lead you to believe that he wants nothing to do with the nascent industry.
On 14 February 2019, the bank said: “J.P. Morgan does not endorse the use of any particular cryptocurrency for investment or other purposes.” However, Jamie Dimon’s statements aren’t contradictory if you don’t consider JPM Coin to be a cryptocurrency at all.
Kevin McMahon, executive director of emerging technology at digital tech company SPR, said:
“There aren’t any inconsistencies between what [CEO] Jamie Dimon has said publicly about bitcoin and JPMorgan’s foray into distributed-ledger technologies and applications because JPM Coin isn’t a true cryptocurrency …
“It’s not intended to replace or even compete with cryptos like bitcoin. This is an application of distributed-ledger technologies (DLT) to improve specific business cases that JPMorgan and their institutional clients have.”
The invention of JPM Coin is a utilization of blockchain technology rather than a U-turn on cryptocurrency attitudes within the company. Jamie Dimon has been less vocal about his current opinion on Bitcoin in the last year, but I think it’s safe to assume he probably isn’t a fan since the nature of Bitcoin flies in the face of the bank’s goals.
JPMorgan saw the potential in a blockchain solution in solving some issues the bank were having with old tech such as wire transfers, and JPM Coin was the solution to this problem. JPM Coin was never meant to be a direct competitor of Bitcoin or Ethereum or any other true cryptocurrency on the market. JPM Morgan does a good job of explaining the ins and outs of JPM Coin on their website, but they probably could have avoided criticism if they made it clearer that the coin isn’t a cryptocurrency considering Jamie’s history.
We’ll leave you with another quote from Jamie from October later year:
“I didn’t want to be the spokesman against bitcoin. I don’t really give a shit — that’s the point, OK?”