A lot of people are twittering – and Tweeting – this week about the fact that JP Morgan filed a patent for its own cryptocurrency. The move certainly holds some interesting implications but ‘JPM Coins’ as a realistic competitor to Bitcoin is not one of them. Quite the opposite – it is more evidence that Bitcoin is a serious alternative to many revenue lines upon which banks are dependent.
First, could ‘JPM coins’, a corporate cryptocurrency, succeed? To achieve success as a widely-used currency, the ease of use must transcend what users already have. In a vacuum, JPM’s currency is certainly easier than all the friction one encounters using the existing methods of transacting – any cryptocurrency is – but we don’t live in a vacuum: if a currency is usable only in the economy of a single company (corporate “autarky”) even one as large as JPM, it is not “easy to use”, its just another layer users face in their overloaded financial universe. JPM Coins’ limited footprint will kill it in the cradle.
Even within the JPM economy, it doesn’t change much. I can already easily pay other people who also have a JPM Chase account (Chase Quickpay) and I can easily transfer money to a company that has an account at JPM. Maybe the JPM cryptocurrency will make those things a touch easier but not enough for me to care and it impacts the life of those outside of JPM, i.e., 99% of the parties with whom I transact, not at all.
Cryptocurrency is still a winner take most game and a cryptocurrency owned or sponsored by a corporation is not going to win.
The implications of the patent filing by JPM do, however, bode well for Bitcoin. Jamie Dimon is not stupid. In fact, he is brilliant. So why did he do it? Like all of Wall Street, Dimon is alternately propelled by fear or greed. This move smells like fear. He knows Bitcoin is a serious threat to parts of his banking business and this is an attempt to dilute that threat. It’s as if a large competitor just entered his market. He needs to counter-punch. Unfortunately for him and much of his industry, he is punching at air. His new competitor is everywhere and nowhere.
Better to integrate Bitcoin into his company and get ahead of other banks than to waste time creating a rival currency. If this were 1992, would JPM be better off filing a patent to create it’s own, closed Internet, or leveraging existing protocols to get ahead in his industry? JPM’s “competitor” to Bitcoin will work out about as well as AOL’s 1990s walled garden did (or as well as Facebook Credits did).
JPM Coins are also dead on arrival because of regulatory overhang: governments will have a hard time regulating a decentralized “currency” like Bitcoin but they can easily regulate a bank. Regulate JPMorgan and you regulate its currency.
In sum, it’s a little annoying that JPM is dragging patents into the cryptocurrency movement but it has no negative implications for Bitcoin. In fact, it’s good news: when someone of Dimon and JPM’s seriousness acknowledge Bitcoin’s power, it’s strong proof that Bitcoin is no fad.