- JPMorgan will now be serving crypto exchanges and Coinbase and Gemini are its first clients.
- CEO Jamie Dimon has been a long-time critic of bitcoin and has touted the cryptocurrency “a fraud.”
At a time when the markets’ assets are struggling, the traditional finance industry is becoming increasingly open to employing financial technology as a part of its services as they are realizing its value.
Approved last month, the bank has taken two crypto clients – Coinbase and Gemini – and is already processing their transactions. It is primarily offering cash management services handling US dollar-based transactions for the clients’ US-based customers, WSJ reported.
Additionally, the bank will also process wire transfers including deposits and withdrawals through its Automated Clearing House network.
Both the exchanges went through laborious vetting processes by the bank before the deal was made, the report detailed.
How did long-standing critic JPM bank embrace Bitcoin?
This is the first time that the bank has teamed up with firms in the crypto space and given that CEO Jamie Dimon has been explicitly critical of Bitcoin the news is particularly significant.
In the past, Dimon deemed Bitcoin as a “fraud” and used an analogy of the Dutch tulip bulb to describe the cryptocurrency predicting that future of the coin “won’t end well.” In July 2019 Dimon even told Yahoo Finance that “crypto companies want to eat our lunch.”
Despite the relationship the bank had with Bitcoin in the past, it has always been supportive of blockchain. In fact in February this year it released a report and stated that:
“Blockchain is laying the foundation for digital money,” and that the rise of databases like Ethereum has disrupted the process of payments.
“Payments, trade finance, and custodial services remain the clearest use cases for blockchain,” the report said.
JP Morgan has also built its own blockchain service with its own digital token, called JPM Coin, which allows instant payment remittances between institutional accounts.
Dimon even suggested the coin could become mainstream. “JPMorgan Coin could be internal, could be commercial, it could one day be consumer,” he said as reported by CNBC.
The bank has reportedly been considering a merger of its blockchain unit Quorum along with Ethereum-focused firm ConsenSys.
Realising the scope of crypto
Up until now, banks serving exchanges working with digital assets are few and far between. Notably, this new move by JPM will pave the way for an increasingly supportive banking relationship for Bitcoin companies in the future especially because crypto exchanges in the US are struggling to receive proper banking services as they are viewed as a high risk.
Last August, Barclays stopped providing banking services to Coinbase. As a result, there are only institutions such as Silvergate which have been filling the gap in the sector.
After this partnership the bank is indeed now leading in technology by embracing crypto exchanges.
“In the same way, the Paul Tudor Jones news gives macro hedge funds a justification to look at bitcoin, the largest bank offering crypto exchange services means a lot of credibility for the space,” a banker told The Block.
While Gemini and Coinbase are being reported as the first crypto clients for JPMorgan, TokenSoft, a software provider for security token services, beat them as it has had an account at the bank since 2017, TokenSoft CEO Mason Borda said on Twitter.
— Mason & Co. (@masonic_tweets) May 12, 2020
In fact, this is not the only change the bank witnessed. The top leader of cryptocurrency trading platform Bakkt, Mike Blandina, left the firm to join JPMorgan Chase to work in payments, as reported by Reuters.
With cryptocurrency firms now accepted by a major bank such as JP Morgan, it seems realistic for other banking institutions to follow the giant’s footsteps. Whether this partnership results in JPM coin being offered on either of those platforms or if the bank will take on more such clients is something only time will tell.