Due to the fact that Bitcoin and cryptocurrencies have long by mainstream financial institutions been seen as tools for criminals — and criminals only — banking services have been hard to come by for crypto firms and services.
Search up “Bitcoin” and the name of a bank and you’ll likely find stories about how that institution disallowed the purchase of cryptocurrency, denied accounts for industry startups, and other restrictions along those lines.
Hence, when it was revealed that JP Morgan Chase, one of the world’s largest banks, has started to service crypto companies, many were shocked.
JP Morgan Services Coinbase and Gemini, Its First Crypto Clients
According to a report from the Wall Street Journal published on Tuesday morning, JP Morgan Chase has taken on two top Bitcoin exchanges, Coinbase and Gemini Trust. These are purportedly the first clients the bank has taken on that are “crypto-native” — that’s to say, operating solely/mostly in the cryptocurrency industry.
Per the Wall Street Journal’s sources, “people familiar with the matter,” the accounts were opened and approved in April, and transactions through the account have just started to be processed.
The transactions going through the account are primarily for “cash-management services” and for deposits and withdrawals by wire transfers and the Automated Clearing House network for the two exchanges’ U.S.-based clients.
Not any crypto company can become a client of the multinational bank now though. The sources indicated that the reason why Coinbase and Gemini were seemingly expedited as clients was that they are heavily regulated by a number of entities in the U.S., ensuring that abuse of their trading platforms is kept to a minimum.
It’s a Big Deal
According to Mike Novogratz — CEO of Galaxy Digital and a former partner at Goldman Sachs — this news is a “big deal.”
The Wall Street investor explained that the firm’s acceptance of prominent clients in the space is “recognition that the future will include crypto currencies, digital assets, and blockchain based systems.”
The JPM announcement that they will provide banking services to Coinbase and Gemini is a big deal. Go $BTC. It is recognition that the future will include crypto currencies, digital assets, and blockchain based systems.
— Michael Novogratz (@novogratz) May 12, 2020
This comes shortly after Novogratz commented to CNBC that Bitcoin has been subject to a swath of other tailwinds, included but not limited to the block reward halving that took place, the printing of money by central banks and governments, and the news that macro hedge fund investor Paul Tudor Jones is delving into the Bitcoin space.
The Bank’s Warming Up to Bitcoin
JP Morgan’s acceptance of two crypto clients shows it is giving Bitcoin and its ilk a much different treatment than it did just years ago.
Company CEO Jamie Dimon has been a critic of Bitcoin in the past, calling the cryptocurrency a “fraud” that will “blow up” in late-2017 as the bubble took the cryptocurrency past $4,000 for the first time ever. Dimon also indicated that he would fire any company trader who dealt with the cryptocurrency “in a second.”
He eventually retracted these comments, remarking that he “regrets,” and the company has seemingly changed its tune on cryptocurrencies since then. The Coinbase and Gemini news is the latest example of this.
The company has its own cryptocurrency now called JPM Coin, which is purportedly being used for internal transactions between branches and divisions of the bank to reduce processing times and transaction costs. Dimon suggested at a conference that one day, maybe JPM Coin could be used to buy goods in physical stores.
JP Morgan has also delved into the use of blockchain technology through its Quorum project, which is a derivative of Ethereum’s code base, that allows the creation of blockchains.