I still can’t decide what JPMorgan’s Jamie Dimon was thinking when he recently dissed cryptocurrencies. He dubbed bitcoin a “fraud.”
Was it cluelessness? Self-interest? Fear?
If he feels that banks and cryptocurrencies can’t coexist, why is his own bank partnering with privacy-focused cryptocurrecy Zcash? (See my last post here for the juicy details.)
Dimon got skewered in an avalanche of Twitter and blog comments.
Of course, that doesn’t mean a thing.
A former JPMorgan executive told him, “You’re not a trader or tech entrepreneur. Please, STFU about trading bitcoin.” That doesn’t make him wrong either.
We expressed our own thoughts on Jamie’s comments here. We reminded our readers that back in 2015 Dimon said that bitcoin “wouldn’t survive” at $400.
It’s now worth more than $4,000.
Though they temporarily spooked the cryptocurrency markets, his remarks don’t concern us. I personally think he’s placed himself on the wrong side of history.
Consider this recent World Economic Forum report. It predicts that by 2025, 10% of GDP will be stored on blockchains or blockchain-related technology.
But I could be wrong, and he could be right.
I also don’t think this should be viewed as big banks vs. onrushing blockchain technology battle.
Far from impeding the advancement of blockchain technology, banks will be first and foremost one of its primary drivers and users.
JPMorgan’s partnership with Zcash in just one example.
Bank of America has more than 30 known blockchain patent applications to date.
Seven of Europe’s biggest banks are stepping up their use of blockchain technology by hiring IBM to build a platform for small businesses to finance their cross-border orders in the region.
The more banks fear the leap in efficiency and security that blockchain technology represents, the more they’ll try to co-opt the technology for themselves.
This is the context in which you should understand this declaration from Barclays Vice Chairman of Corporate Banking Jeremy Wilson: “We are in the process of developing a new operating system for the planet.”
Notice that he said “we.”
Banks don’t plan on being on the outside looking in.
This millennial transformation won’t happen overnight. And it won’t occur without bumps along the way.
I was talking to a friend of mine this past weekend about this. He’s in the foreign exchange department of a big American bank. I asked him when he thought blockchain technology would put him out of a job. (Though I put it more delicately than that!)
He said likely in 10 to 15 years.
I then asked him when blockchain technology would push banks out of the letter of credit business. He said in about five years.
Change will come in different forms and at different speeds to various parts of the global financial system. Not everything will happen at once.
If nothing else, bankers have a pretty good understanding of how the current financial system works. And they seem to understand this.
At a recent conference, Xavier Laurent from Crédit Agricole CIB warned against trying to address the whole value chain at once.
Another conference participant echoed the same sentiment. Gadi Ruschin, CEO of blockchain startup Wave, said that “digitizing a complete [financial] process is not realistic today.”
I believe these comments more accurately reflect the philosophy and state of mind of bankers these days… they’re about as far away from the bluster of Dimon’s remarks as you can get.
Bankers are a cautious bunch, and they’re very protective of their own turf. But they’re not stupid. They’re eyeing this groundbreaking, incredibly disruptive technology and instead of getting run over, they’d prefer hopping aboard.
But, because they’re bankers, they want to do so later rather than sooner. Says Goldman Sachs CEO Lloyd Blankfein: “Still thinking about bitcoin.” He went on to say that he wasn’t giving his approval or disapproval.
In banking circles, that’s called leadership. Amazing.
Co-Founder, First Stage Investor