JP Morgan Chase, a longtime rival to cryptocurrencies, appears to be feeling the threat of decentralized currency. In an annual report, JP Morgan Chase identifies cryptocurrencies as a source of competition. This is a major change of tune for the institution, which has criticized Bitcoin in the past.
Clues from investor reports
JP Morgan Chase has released its annual Form 10-K report for 2017. Most of this document pertains to shareholders, but this one offers a bit more than usual. For those inclined to read between the lines, the report gives clues about JP Morgan Chase and their stance on cryptocurrencies. In the Competition section of the report, the bank affirms that competition in the financial services industry has been fierce. They don’t expect the pressure to let off anytime soon and have identified some unexpected players.
In the past, JP Morgan Chase CEO Jamie Dimon has ridiculed Bitcoin holders, dismissing tham as ‘stupid’, and calling the entire system a fraud. He has even gone so far as to imply that employees dealing in Bitcoin were risking their jobs. Mr. Dimon has softened some of those claims, doubling back on his ferocity, but some of us think he protests too loudly. What better way to undermine an enemy than to dismiss it?
In the 10-K annual report, JP Morgan Chase seems wary of that enemy. In addition to listing the usual competing institutions, Chase offers disclaimers that the banking entity can’t assure investors that competition won’t disrupt their operations. The report acknowledges that there are new competitors on the scene, and doesn’t seem to be taking them lightly.
If you can’t beat them…?
After dancing around the issue a bit, the report explicitly names e-commerce and cryptocurrencies as major threats. The report states that mobile and internet based portals are just the tip of the iceberg in keeping up with the growth of e-commerce. Payment processing and automated banking advice also pose real competition. JP Morgan Chase notes that cryptos are possible disruptors for both banking institutions and non-banking entities.
Although they feel that crypto competition doesn’t require immediate intermediation, they do feel it is a piece of the competition pie. JP Morgan Chase says that they intend to modify and adapt products in order to appeal to a wider range of customers, and further, that they will make greater efforts to retain existing clients. Their strategy includes matching or outperforming products and services that the other guys offer, whether the other guy is a bank or a tech company.
In case you were wondering, ‘intermediation’ refers to Wall Street pressure. Cryptos will eventually put downward pressure on the prices and fees for JP Morgan Chase products. That pressure could cause the bank to lose market share. Why the bank wouldn’t want to strike first is a mystery.
Nothing in the report specifically laid out the big bank’s fear of cryptos, but it does seem to beg questions. The report hints that in order to remain competitive, Chase may have to extend more capital toward business competition investments. That could find the bank itself in the precarious position of having to join forces with their nemesis, and begin trading crypto itself.