Bitcoin has long been the marquee name — shorthand, if you will — for the cryptocurrency space.
Price swings can tell a lot about how investors, or speculators, view the prospects of a particular holding. And in recent months, the ride has been wild for bitcoin pricing amid the pandemic. At a recent quote of about $8,770, the price is well off nadirs of less than $5,000 hit in March amid global selloffs of well … everything. On the other hand, bitcoin is also well off of its all-time highs of just under $20,000.
In recent weeks, part of the volatility can be traced to “halving,” which is an adjustment to the rate at which the coins are actually produced by “miners.”
But against a larger backdrop, the price swings also hint at a few different forces at work, possibly at odds with one another. Speculation yes, but also the expectation of legitimacy, that bitcoin will find utility beyond changing hands in sessions that see 10 percent swings (or more) up and down.
On Tuesday (May 12), The Wall Street Journal reported that U.S. banking giant JPMorgan Chase is providing banking services to Coinbase and Gemini, two U.S.-based crypto exchanges. (Coinbase is the largest U.S. bitcoin exchange.)
According to the Journal’s unnamed sources, this is the first time JPM is taking on corporate clients from that industry. The bank is providing cash-management services for the exchanges’ U.S. customers, and reportedly will process wire transfers, deposits and withdrawals from the Automated Clearing House Network. But importantly, the Journal said JPMorgan won’t provide services for bitcoin- or crypto- related transactions. The exchanges, according to the reports, will tackle those transactions.
One selling point to get JPMorgan to tiptoe into banking services for crypto may be due to the fact that the exchanges are relatively heavily regulated, with security qualifications in place (or “SOC,” for short) that address security, processing and data privacy.
A few years ago, JPMorgan CEO Jamie Dimon stated that bitcoin amounted to a fraud that was “worse than tulip bulbs.” Tuesday’s news might seem an about-face, but we note that JPMorgan is essentially sticking to its knitting — working with fiat and providing the processing services that get funds (in dollars, not cryptos) where they need to go.
JPMorgan, of course, also said last year that it would look to issue its own digital currency, the JPM Coin. That coin, as has been reported, would be equal to one U.S. dollar, with explicit backing of the dollar that would be held in accounts at JPMorgan.
That’s a lot different than decentralized cryptos. Bitcoin enthusiasts tout decentralization as a selling point in that pricing isn’t controlled by the Federal Reserve or other central banks.
The idea of digital fiat is also gaining traction as the pandemic rages on. China is in the midst of piloting a “digital yuan” project across several cities. And here in America, various bills in the House and Senate have proposed digital greenbacks. Again, these are centralized bits-and-bytes forms of what’s existed for centuries, poised to ride traditional banking rails but nonetheless settle in various corporate accounts with speed and security.
The “coming consumer crypto revolution” has been in the works for a while, but has yet to really take off. As coinmap.org shows, as of this week, an estimated 19,437 venues and ATMs across the globe either accept or dispense cryptocurrencies. Though the number has been rising, it’s a drop in the bucket against supporters’ hopes of worldwide acceptance.
The Risks of Fraud
Other use cases — less savory ones — are emerging for cryptos. Last month, the FBI warned that crypto-related scams are on the rise.
“People of all ages, including the elderly, are being victimized by criminals through cryptocurrency-related fraud schemes,” the bureau said, pointing out blackmail and work-from-home scams.
The FBI also noted that “many traditional financial crimes and money laundering schemes are now orchestrated via cryptocurrencies.”
As noted in a report by the Better Business Bureau, crypto-related fraud represented a higher risk than other types of fraud, including payments fraud. The BBB found an average loss per victim aged 25 to 44 of as much as $3,000. Drilling down a bit, cryptocurrency scams ranked above online purchase fraud and fake checks/money orders.