Can Crypto Break Central Banks?

  • Virtual currencies unlikely to challenge sovereign currencies and central banks
  • The Bitcoin experiment has not only survived but expanded beyond niche status
  • Bitcoin could overcome some of the historic disadvantages of private money

The European Parliament’s Committee on Economic and Monetary Affairs (ECON) latest dialogue, Virtual Currencies and Central Banks Monetary Policy: Challenges Ahead, says cryptocurrency is unlikely to take the place of fiat currency, even in the long term.

The July report, says that despite many skeptical opinions, the Bitcoin experiment has not only survived but expanded beyond niche status. Its broad popularity was due in most part to the 2017 bubble which was responsible for attracting new participants to the market.

While the report argues that cryptocurrency is fundamentally private money, and past experiments with private money, such as during the free banking era in the US in the 19th century, failed for a number of reasons, it believes some cryptocurrencies, such as Bitcoin, may be able to overcome some historic disadvantages.

Virtual currencies are a contemporary form of private money. Thanks to their technological properties, their global transaction networks are relatively safe, transparent, and fast. This gives them good prospects for further development say the report’s authors:

To compare them to failed money experiments of the past is limited virtual currencies have a better chance to survive and develop as compared to their predecessors. However, they remain unlikely to challenge the dominant position of sovereign currencies and central banks, especially those in major currency areas. But, in extreme cases, such as during periods of hyperinflation, financial crisis, political turmoil, or war, they can become a means of currency substitution in individual economies.

The report takes a brief look back at the history of private money and concludes that future progress in technology might increase the chances for virtual currencies to effectively compete with sovereign currencies, including the major ones.

JPMorgan Chase Positively Wades Into Crypto After Years of Hate

Colin Muller
  • JPMorgan is now servicing Gemini and Coinbase
  • The move represents a full reversal of JPM's stance
  • Crypto is now deeply institutionalized

The financial services giant and bank JPMorgan Chase & Co have seemingly reversed on a long-held stance, that crypto is bad, by beginning to service U.S. cryptoasset exchanges Gemini and Coinbase.

JPMorgan’s apparent reversal comes after years of institutionalized disdain for crypto, with the bank’s CEO Jamie Dimon being a vociferous critic circa 2017. According to Bloomberg, JPMorgan had been conducting due diligence on the exchanges “for months” before making the move. The bank’s adoption of crypto signals what can only be a highly regulated crypto-fiat landscape.

During 2019, JPMorgan had in fact started to visibly thaw on the subject of crypto, even experimenting with their own distributed ledger tech in the form of the so-called “JPM Coin”.

Dimon displayed during an interview his awareness of the competition posed by crypto, directing his people to assume that crypto and/or Fintech was “coming [...] to eat your lunch.” Despite this, he was bearish on the prospect of Facebook’s Libra project succeeding or even launching, saying in October 2019 that it would “never happen”.

big dropJPM chart by TradingView

JPMorgan’s publically traded stock has fallen recently, retreating from all-time-highs set in December 2019 in February, even before the coronavirus pandemic started to wreck the markets in March. It is down about 37% from those highs, trading now at about $87.

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