JPMorgan CEO Jamie Dimon disparaged the cryptocurrency bitcoin on Sep. 12, calling it a “fraud,” comparing it to the tulip mania of the 17th century, and predicting that it will “blow up.”
Speaking at the Barclays Global Financial Services Conference, Dimon remarked:
When the DOJ calls someone up and says, “That’s an illegal currency and it’s against the laws of the United States… if you do it again, we’ll put you in jail,” it’s over.
Dimon added that an employee who traded bitcoin would be fired “in a second, for two reasons: It is against our rules and they are stupid, and both are dangerous.”
It is unclear whether Dimon considers his daughter “stupid,” as he later joked that she “bought some bitcoin, and it went up, and she thinks she’s a genius now.”
Asked to explain his comments at the Delivering Alpha conference, Dimon warned that while governments presently view bitcoin “as a novelty,” they will “close it down” when it gets too large.
Dimon clarified that his criticism is aimed not at blockchain technology but at virtual currencies that circumvent government control. JP Morgan itself is working on a blockchain, “Quorum,” which is bitcoin’s main competitor.
Dimon’s comments ignited a backlash from bitcoin supporters.
ShapeShift CEO Erik Vorhees tweeted, “My memory is failing, was it Bitcoin or was it JP Morgan that was bailed out by the government?”
Forbes senior editor Laura Shin said the idea that bitcoin could be “closed” is “ridiculous – hilarious, even” because its decentralized nature makes that nearly impossible.
In an open letter to Dimon, Shin suggested that his uneasiness regarding bitcoin stems from its potential to disrupt financial services:
I would be surprised if cryptocurrencies, with their many advantages, don’t prevail over the long-term – especially at a time when everyday people are still angry about paying for the economic crisis caused by financial institutions while bankers made off with bonuses. Since the triumph of cryptocurrencies is the fact that they cut out the middle man… I could understand if you wanted Bitcoin shut down or hoped it was a fraud. I mean, if I were you and if I really understood the disruption crypto assets could bring to financial services, I’d be very scared… It just remains to be seen how much longer people who want to buy crypto assets – or engage in any financial transaction, for that matter – will do so through a middleman like JP Morgan Chase.
Others speculated that Dimon was engaging in market manipulation — causing bitcoin’s value to decrease so that he could “buy low.” The value of bitcoin (and other cryptocurrencies) did drop following Dimon’s comments, although a causal link has not been established. Many interpreted a widely circulated screenshot as proof that JPMorgan had purchased bitcoin.
One Redditor even called for a class action lawsuit against Dimon, alleging:
- He badmouthed bitcoin.
- The day after, prices fell.
- His company bought the dip.
- Altcoins lost value along with bitcoin.
But a JPMorgan spokesperson told Business Insider that the orders shown in the screenshot “are not JPMorgan orders. These are clients purchasing third party products directly.”
That explanation did not pacify Dimon’s critics.
If the CEO of the financial firm that handles my investments firmly states that a particular investment is a fraud and likens it to the tulip bulb bubble and I felt strongly enough that he was wrong and I was willing to put my own money behind it, I would seriously need to question who is handling my investments moving forward.
While most of those responding to Dimon’s comments were critical, some in the industry defended him. Ron Insana, senior analyst at CNBC, agreed with Dimon’s point that “bitcoin is in a bubble,” while acknowledging that “as in the case of many prior breakthrough technologies, the transformation will indeed be disruptive and extremely important.”
Meanwhile, MGT CEO John McAfee denied that bitcoin is in a bubble. He characterized the blockchain as “ushering in a new economic and social paradigm” that will render centralized control of currency obsolete.
What people see as a bitcoin “bubble,” from the perspective of the new paradigm, is merely the predictable and systematic devaluation of fiat currencies that will continue, with obvious ups and downs, until all fiat currencies reach the zero point.
As the relative value of bitcoin temporarily drops, they will point to this as proof of their understanding. It won’t matter. The reality of this new world is what it is. Those who understand will be the leaders of this new world.
Whatever Dimon’s intentions, his comments clearly had the effect of generating publicity for bitcoin.