Jamie Dimon: Bitcoin 'is a fraud'

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Jamie Dimon, chief executive of JPMorgan Chase & Co, said at a bank investor conference in New York on Tuesday that Bitcoin “is a fraud” and will blow up. “The currency isn’t going to work. You can’t have a business where people can invent a currency out of thin air and think that people who are buying it are really smart,” he also said.

Different opinions

Dimon said that if any JPMorgan traders were trading the crypto-currency, “I would fire them in a second, for two reasons: It is against our rules and they are stupid, and both are dangerous.”

Dimon’s comments come as the bitcoin, a virtual currency not backed by any government, has more than quadrupled in value since December to more than 4,100 US dollars.

Bitcoin is a digital currency that enables individuals to transfer value to each other and pay for goods and services, bypassing banks and the mainstream financial system.

Jamie Dimon, Chairman and CEO of JPMorgan Chase & Co. speaks during the Milken Institute Global Conference in May. /Reuters Photo

While banks have largely steered clear of bitcoin since it emerged following the financial crisis, the virtual currency has a range of people who support it, including technology enthusiasts, libertarians skeptical of government monetary policy and speculators attracted by its price swings.

“Like it or not, people want exposure to bitcoin,” Edward Tilly, chairman and CEO of exchange group CBOE, said at the same conference. Any good trade is started with a difference of opinion, Tilly added.

CBOE has applied with US regulators to launch a bitcoin futures contract and a bitcoin exchange traded fund on its venues.

“Worse than tulip bulbs”

Banks and other financial institutions have been concerned over bitcoin’s early association with online crime and money laundering.

The supply of bitcoin is meant to be limited to 21 million, but there are clones of the virtual currency in circulation which have made the market for it more volatile.

“It is worse than tulips bulbs,” Dimon said, referring to a famous market bubble from the 1600s.

Bitcoin /Reuters Photo

JPMorgan and many of its competitors, however, have invested millions of dollars in blockchain, the technology that tracks bitcoin transactions. Blockchain is a shared ledger of transactions maintained by a network of computers on the internet.

Dimon said such uses will roll out over coming years as it is adapted to different business lines.

Financial institutions are hoping blockchain can be adapted to simplify and lower the costs of processes such as securities settlements, loan trading and international money transfers.

Dimon predicted big losses for bitcoin buyers. “Don’t ask me to short it. It could be at 20,000 US dollars before this happens, but it will eventually blow up,” he said.

Bitcoin’s price fell as much as four percent following Dimon’s comments and was last trading at 4,164 US dollars.

Source(s): Reuters