Daily Briefing: “Decentralized Ponzi Schemes”

Dimon described Bitcoin and different crypto tokens as “decentralized Ponzi schemes,” however he was extra optimistic about DeFi and good contracts.

Dimon Slams Bitcoin

Yesterday, the crypto house was handled to some harsh however perplexing feedback from JPMorgan CEO Jamie Dimon. At a Congressional testimony from a number of high U.S banks, Dimon, who has a monitor file of flip-flopping on his crypto views, dished out criticism in opposition to Bitcoin whereas additionally showing to laud its rivals.

Consultant Gottheimer (D-NJ) questioned Dimon on digital property, asking the banking head for his ideas on the speedy improvement of the cryptocurrency sector. Dimon’s response was blended. He prefaced his feedback by separating some digital property from others. “It’s a must to separate blockchain, which is actual, DeFi, which is actual, ledgers, tokens that ‘do one thing,’ ship info, cash, concepts, good contracts—that’s one factor. I’m not a skeptic,” he defined, earlier than switching to a extra extreme tone. “I’m a serious skeptic on ‘crypto tokens’ which you name foreign money, like Bitcoin—they’re decentralized Ponzi schemes.”

Not happy with the Bernie Maddoff comparability, Dimon known as out the concept that the typical individual needs to be investing in “crypto tokens,” highlighting the usage of crypto in a number of legal actions akin to ransomware, cash laundering, intercourse trafficking, and theft. He completed with a somewhat abrupt swap to speaking about digital {dollars}, preaching that there can be “nothing mistaken with a stablecoin that’s correctly regulated,” earlier than taking the chance to plug his financial institution’s personal “JPM Coin,” which acts like a greenback deposit.

Dimon’s eclectic mixture of feedback leaves quite a bit up for interpretation. Earlier than diving into some extra left-field theories, it’s vital to notice that this isn’t the primary time Dimon has lashed out at crypto—particularly Bitcoin. In 2017, he known as Bitcoin a “fraud” earlier than backtracking on his feedback when JPMorgan seemed to launch its personal in-house Bitcoin fund in 2021. Now, it appears he’s again on the assault in opposition to the highest cryptocurrency, though it’s unclear why.

What Is His Endgame?

One concept (and my private favourite) is that Dimon is making an attempt to convey Congress’ opinions extra in keeping with his financial institution’s investments within the crypto house. It’s no secret that JPMorgan holds a considerable stake in ConsenSys, one of many main Ethereum software program corporations. By selling DeFi and good contracts, whereas criticizing Bitcoin, Dimon seems to be making an attempt to distinguish Ethereum and different good contract platforms from non-programmable property.

What’s extra, as one of many largest U.S. banks, JPMorgan will need the greenback to take care of its standing because the world reserve foreign money. I believe it’s telling that Dimon jabbed Gottheimer along with his “which you name foreign money” line when speaking about Bitcoin. My guess is Dimon likes the thought of blockchains akin to Ethereum as a result of they will act as rails for USD. Bitcoin, alternatively, threatens to exchange {dollars}. Iran has already began settling imports utilizing Bitcoin, and Russia has additionally floated the thought of promoting oil and gasoline for the highest crypto.

It’s onerous to say what Dimon’s endgame for crypto is or whether or not it can change once more sooner or later because it has earlier than. In my view, the easiest way to determine what JPMorgan and the opposite large banks is perhaps planning is by taking a look at what would profit them probably the most. As they are saying, cash doesn’t lie.

Disclosure: On the time of writing, the creator of this piece owned ETH, BTC, and a number of other different cryptocurrencies. The knowledge contained on this article is for academic functions solely and shouldn’t be thought of funding recommendation.