New York, NEW YORK – J.P. Morgan Chase’s CEO Jamie Dimon once famously derided Bitcoin as a “fraud.” The bank chief has since backtracked somewhat from his initial stance, having stated that he now regrets his initial stance and instead believes in the technology behind it. Whether his initial comments were meant to throw retail investors off the scent of one of the greatest investment prospects in recent time or he genuinely believed Bitcoin to be a fraud we’ll never know. But as with things of this sort, the easiest way to suss out the truth is to follow the trail of the money. To that end it should come as no surprise that a former insider from J.P. Morgan Chase who was interestingly enough also head of the bank’s blockchain arm, says that her former employer and other major banks could get into the cryptocurrency business sooner rather than later. Amber Baldet, former head of J.P. Morgan’s blockchain arm told CNBC’s “Power Lunch” last Friday,
“I think it’s coming sooner than people probably think. But even where the will is, the legal and regulatory framework is challenging.”
Despite record investor profits from bitcoin’s 1,300 percent rise last year, most banks have stayed away. Goldman Sachs is reportedly moving ahead with plans to set up the first Bitcoin trading operation at a Wall Street bank. But custody is still a huge challenge, Baldet said. Right now, financial institutions have few ways of safeguarding a firm’s digital assets – not because such methodologies are unavailable (such as “cold” wallets which are not connected to the internet), but because most banks simply don’t have in place the security procedures and protocols to handle the digital stuff, according to a bank security expert who declined to be named and who serves several large Wall Street banks,
“They (the banks) know that there’s tremendous opportunity. But they just simply don’t have the capability or the subject matter expertise to deal with the security protocols required. Not to mention legal and compliance.”
Startups by comparison have been far more nimble. Without legacy systems and security protocols to hem them in, startups like cryptocurrency exchange Binance, have demonstrated that they are far more profitable and productive than established names like Credit Suisse. Still, that hasn’t dissuaded legacy banks from throwing their hat in the ring as well. Last Wednesday, Japan-based global investment bank Nomura unveiled a venture to establish a custody offering. Not to be outdone, on Monday, Coinbase, a cryptocurrency to fiat currency startup also announced a fleet of new offerings that includes a custody solution.
Baldet, who was listed on Fortune’s 40 Under 40 list of the most influential young people in business, led J.P. Morgan’s Blockchain Center of Excellence. She played a critical role at establishing the bank’s enterprise blockchain strategy, and its flagship Quorom project.
J.P. Morgan developed its blockchain technology two years ago for clearing and settling derivatives and cross-border payments but despite that, as late as September last year, its CEO Jamie Dimon derided Bitcoin as a “fraud.”