It is a “fraud”, the JP Morgan CEO, Jamie Dimon, said this week. “It’s worse than tulip bulbs … it will be the emperor with no clothes”. He was talking about the internet cash system bitcoin.
It will eventually “blow up”, he said, it’s not a “real thing”. “It will be closed.” Any JP Morgan trader caught buying or selling bitcoins will be “fired in a second” – for “being stupid”, he added.
Bitcoin will always divide opinion – as a non-government system of money, inevitably so. Its most ardent supporters think it will eventually become the reserve currency of the globe. Its sternest critics think it will die a death. It is not hard to work out the side of the fence on which Dimon sits.
Bitcoin was devised in reaction to what happened in 2008 during the financial crisis: printing money, bailing out banks, suppressing rates. The idea was to create a system of money beyond the manipulative hands of government. Although JP Morgan was by no means the most leveraged of the banks, it still took bailout money, and, as its CEO, Dimon and bitcoin will inevitably be philosophically opposed. His utter faith in the US dollar sounds rather like the boss of a major record label talking up CDs a year before the iPod was brought to market.
That said, despite the fact he does not understand bitcoin – which, as the CEO of a major bank, he should – Dimon’s comments do bear some consideration.
First, he says it’s a fraud. Actually, bitcoin is perhaps the most transparent system of money ever invented. Every transaction that has ever taken place, no matter how big or small, is recorded on a database, known as the blockchain, which is shared on hundreds of computers around the world and visible to all. Every entry is permanent. The whole system is built, not on fraud, but on mathematical proof. Hence bitcoin aficionados will say, rather than “In God we trust” as you find on a dollar, but “In proof we trust”.
However, there are many fra...