JPMorgan CEO Jamie Dimon is at it again, calling bitcoin worthless and predicting its spectacular collapse. As a hedge-fund manager focused on the new asset class of bitcoin and other digital currencies, I couldn't disagree more with Jamie Dimon.
Perhaps I have fallen too far down the rabbit hole and my view is warped by my business interest — but there is a reason that I decided to take the career risk of shifting my focus to this new asset class. The reason is that I have seen this movie before with the emergence of the internet.
In the early 1990s, I was a fledgling trader who had moved to New York to make his mark on Wall Street. The internet, as I knew it, existed on a single computer at the end of the trading desk. This "internet" appeared only to be useful for something called email, which, to a trader with telephones on each ear seemed like a novelty. In hindsight, it's abundantly clear that I was too young and inexperienced (read: dumb) to understand the revolution that was happening right before my eyes.
My view is not that Jamie Dimon doesn't understand the disruption that is happening in financial services — on the contrary, I think he is acutely aware. What I think is happening here (predictably), is that the CEO of one of the world's largest financial institutions is threatened by software that was developed to upend his position at the top of the food chain.
It's important to understand that bitcoin and other digital currencies are simply software, a computer program designed to automatically verify and transfer value around the world — exactly the role that JPMorgan currently plays. In fact, JPMorgan moves about $6 trillion a day and they are pretty good at it — but bitcoin and blockchain technology are proving to be better.
In 1995, Newsweek published an article by Clifford Stoll titled "Why the Web Won't Be Nirvana." In this now infamous piece, Stroll wrote this:
"[N]o online database will replace your daily newspaper, no CD-ROM can take the place of a competent teacher and no computer network will change the way government works."
In 2012, 17 years after this story appeared, Newsweek stopped printing its magazine and went fully digital, or what Mr. Stoll might characterize as an "online database." To his credit, Clifford Stoll has acknowledged his very public mistake.
"What I think is happening here (predictably), is that the CEO of one of the world's largest financial institutions is threatened by software that was developed to upend his position at the top of the food chain."
Newsweek wasn't the only one who got it wrong. Robert Metcalfe, the inventor of Ethernet and creator of the eponymous Metcalfe's Law (a tool which I use to value bitcoin) wrote this in InfoWorld 1995:
"I predict the Internet will soon go spectacularly supernova and in 1996 catastrophically collapse."
The parallels to Jamie Dimon's comments are uncanny. Just two years later at the World Wide Web Conference, Metcalfe literally ate his words when he blended a copy of his column with water and consumed it with a spoon.
Of course, Jamie Dimon's grouse isn't with the technology behind bitcoin called blockchain, it's with the currency. He believes that the larger bitcoin grows, the more of threat it becomes to governments and they will shut it down rendering the currency worthless. The recent ban in China might be viewed as supportive of his view. If other countries were following China's lead, then I might be asking Jamie Dimon for a job, but the major financial hubs of the world have embraced bitcoin and other digital currencies.
In April of this year, Japan enacted a law that declared bitcoin as legal tender and brought digital currency exchanges under the supervision of Japan's Financial Services Agency. South Korea has officially legalized international bitcoin transfers and is currently working on a regulatory framework for this new asset class. According to CryptoCompare, in September 2016, China accounted for 92 percent of bitcoin trading volume, Japan accounted for 12 percent and South Korea only 0.4 percent. Today, Chinese bitcoin volume is non-existent while Japan accounts for 50 percent of the volume and South Korea is 6 percent.
I would also be worried if other banking CEOs were echoing Jamie Dimon's warning, but they are not. In fact, in a June 2017 interview on CNBC, Ashok Vaswani the UK CEO of Barclays said the bank has approached regulators about bringing bitcoin "into play." In February 2017, Mizuho Financial, Sumitomo Mitsui Financial and Mitsubishi UFJ all invested in bitFlyer — Japan's largest bitcoin exchange. In August 2017, bitFlyer opened an office in San Francisco and announced it had received approval to operate in 34 U.S. states. It plans to launch its U.S. exchange this fall.
Of course, Jamie Dimon could be correct and this trend toward acceptance might reverse. In that case, I will be the one blending his words into a smoothy and drinking it. But, if I learned anything during my formative years on Wall Street, it's that "nothing can stop an idea whose time has come."
Commentary by Brian Kelly, the founder of BKCM LLC, a hedge fund which manages digital assets, and a CNBC contributor. Kelly is the author of the book "The Bitcoin Big Bang: How Alternative Currencies are About to Change the World." Follow him on Twitter @BKBrianKelly.
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