Earlier this week, Jamie Dimon, the C.E.O. of JPMorgan Chase, went on a notable, vociferous tirade against Bitcoin, the cryptocurrency that has been associated over the years, fairly or not, with the Silk Road drug ring, the Winklevoss twins, and, more recently, mind-blowing returns. Over the years, Bitcoin has become a preferred Dimon nemesis. In 2015, when it was worth around $400 apiece, Dimon predicted that the cryptocurrency wouldn’t survive. This summer, Bitcoin briefly reached a value of $5,000 per unit.
Nevertheless, Dimon appears relentless in his criticism. The normally genial C.E.O., who also recently indulged in an unrelated rant about the state of the American experiment and all the “stupid shit” our country is engaged in, appeared uniquely peeved about the recent Bitcoin rally. He called Bitcoin a “fraud.” He said it was “worse than tulip bulbs”—an arcane reference to the tulip mania that seized 17th-century Holland, a favorite of Wall Street types—and “limited.” His apoplectic screed didn’t end there, either. He said that Bitcoin was only used by drug dealers and murderers. This wasn’t going to end well, he suggested.
Dimon is obviously a very smart guy. He’s worth an estimated $1.15 billion. He makes around $30 million a year. He went to Harvard Business School, and survived both the financial crisis and a bout with throat cancer while running one of the world’s biggest banking institutions. So I was more than a little surprised to hear someone of his intellectual caliber explain that he would fire an employee “in a second“ for being “stupid“ enough to trade in digital currencies. (It’s particularly confusing because JPMorgan helped create the Enterprise Ethereum Alliance, a competing cryptocurrency initiative, and developed its own cryptocurrency product built on top of Ethereum.) But Dimon was unequivocal. “It’s against our rules, and they’re stupid. And both are dangerous,” he said.
I have a different theory, however, for why Dimon feels so skeptical about this particular market. I suspect that Bitcoin, and other similar digital currencies, intimidate Wall Street. And if they don’t, they probably should. Putting aside Dimon’s limited understanding of use cases for cryptocurrencies—if you’re a drug dealer or murderer, for example, the preferable currency is actually Monero, which (so far) is truly anonymous and virtually untraceable—Bitcoin has remarkable benefits that have spiked demand. Bitcoin, which can be acquired on a number of online exchanges, disrupts the need for a bank to intermediate transactions. It isn’t controlled by any single person; instead, it’s controlled by the peer-to-peer software that allows people to own Bitcoin. Unlike typical financial institutions, you don’t need a driver’s license to open a Bitcoin account; you don’t pay a “bank” to store your money in its vault; and anyone with an Internet connection can access it, use it, and easily buy and sell it across continents, just like all other digital entities.
Perhaps more important, when I ask people in Silicon Valley which seminal technological advance they think will change the world most in the coming decade, the answer is almost always “the blockchain,” which is the ledger that tracks all transactions for a cryptocurrency. Unlike a traditional bank or corporation, which can be hacked, the blockchain, which is sometimes described as a global spreadsheet, is impossible to break into, and while it’s public, it protects people’s privacy and identities. That technology, people often say, can be applied to anything in the future. For example, you can imagine tracking the financial transactions associated with a politician’s presidential campaign. Or you could imagine buying a skirt steak at Whole Foods, which is part of the blockchain, and being able to see which cow it came from in Portland, and what that cow ate when it was alive. It truly keeps everyone on the blockchain honest.
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Don’t get me wrong: there are plenty of things to worry about when it comes to Bitcoin and cryptocurrencies. There’s theft, massive and volatile fluctuation in pricing, the government’s attempt to dissuade people from using them, and even increased regulation to deter the growth of the platform. There are people who forget their passwords and then there’s no way of getting a new one. (One friend of mine lost his password and therefore lost connection to tens of thousands of dollars in cryptocurrency.) Most notably, though, cryptocurrencies, unlike cash, are still incredibly confusing to use. And as a result, the market continues to oscillate.
Dimon’s rant sent the value of Bitcoin plummeting several hundred dollars on the exchanges. But even after that drop, the combined market capitalization of cryptocurrencies is close to $140 billion, half of that belonging to Bitcoin. Perhaps most threatening to Dimon is that these cryptocurrencies add up to 40 percent of the valuation of JPMorgan Chase, which is currently valued at $332 billion.
Chase is, of course, the biggest bank in America, and in no danger of being usurped any time soon. But as the digital revolution continues to upend our world, it’s worth noting that no institution is permanent any longer. As we watch car companies in Detroit relent to Silicon Valley ride-sharing start-ups, or see Amazon truly eviscerate what is left of retail, one wonders if a full-scale disruption of the banking system is not far in the offing. One thing is abundantly clear: the current financial institutions that we live with today are ripe for disruption. (As my colleague William D. Cohan recently noted, JPMorgan Chase paid $13 billion, in part, to suppress a document alleging a number of improper practices in the run-up to the financial crisis.)
The banking system has been contorted to make a select few richer, and give way too much control to a handful of ultra-wealthy bankers and C.E.O.s. The same has not yet been proven for Bitcoin and other digital currencies. And for some on Wall Street, that might be pretty scary.