For the first time ever, JPMorgan Chase has recognized cryptocurrencies as both a risk and competitor to their business. This comes on the heels of a report from Bank of America citing similar concerns surrounding cryptocurrencies being a threat to the banking industry.
JPMorgan Chase’s CEO, Jamie Dimon, has been vocal about his criticism for Bitcoin and other cryptocurrencies, but regardless of his opinion the bank is clearly beginning to take them seriously. In the bank’s annual report released Tuesday, cryptocurrencies were cited as a “risk factor” for its business, conceding that these relatively new technologies could very well revolutionize the banking industry.
“Both financial institutions and their non-banking competitors face the risk that payment processing and other services could be disrupted by technologies, such as cryptocurrencies, that require no intermediation,” the bank said in the report.
One of the most profitable features of cryptocurrencies are their low fees for things like transactions and transfers. With regard to these features, the bank wrote, “Ongoing or increased competition may put downward pressure on prices and fees for JPMorgan Chase’s products and services or may cause JPMorgan Chase to lose market share.”
In recent weeks, JPMorgan’s blockchain initiatives department released a 71-page report detailing the benefits, issues, and purposes of multiple major cryptocurrencies, including Bitcoin and Ripple’s XRP. After reviewing existing technologies and analyzing their use cases, the team of analysts confirmed that, “Opportunities for banks to utilize blockchain technologies for conducting business could have far-reaching implications for the sector in our view.”
At the Yahoo Finance All Markets Summit in early February, JPMorgan Chase’s head of blockchain initiatives, Umar Farooq, spoke about blockchain technology, saying that, “It’s more than thriving. People have been surprised how quickly it basically spread as a way to address and think about customers differently…It’s quite insane.”
The recent increase in the market cap of the cryptocurrency markets has brought widespread awareness to the usefulness of these technologies, and the banking industry has its first major competitor in ages. Despite banning credit and debit card users from making purchases at online exchanges like Coinbase, JPMorgan Chase and other large banks may soon have to embrace cryptocurrencies or else they will lose out on billions of dollars in revenue.