JP Morgan first major US bank to serve crypto exchanges as banking clients
JP Morgan is reportedly serving bitcoin exchanges – Coinbase and Gemini – as banking clients, according to Wall Street Journal sources.
It’s the first time the US banking giant has taken on crypto clients. The exchanges were approved in April as customers under the bank’s corporate and investment division, and are now starting to process transactions through the bank, per the report.
Traditionally fenced out by banks as clients too risky to take on – Barclays stopped providing banking services to Coinbase last August, it now seems that America’s biggest bank is becoming more comfortable with the idea of servicing players in the crypto world.
Gemini and Coinbase handle cryptocurrencies including Bitcoin, Ether and Litecoin
Primarily, the bank will be helping the virtual exchanges manage dollar-based transactions in the US and won’t be handling any cryptocurrency transactions, according to a WSJ source.
All the exchanges’ dollar-based wire transfers, deposits and withdrawals will be processed through the Automated Clearing House (ACH) network.
“There is little business in fees associated with processing wire and ACH payments,” a banker told The Block.
“I would expect that there are other associated benefits to JP Morgan from any associated banking services, additional collaboration with both of those firms, potential for winning any future IPO or another angle such as JP Morgan coin being offered on either of those platforms.”
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Gemini and Coinbase handle cryptocurrencies including Bitcoin, Ether and Litecoin. JP Morgan conducted due diligence “for months” on the exchanges, likely helped along by the fact both are regulated and registered as money transmitters with the Financial Crimes Enforcement Network (FinCEN).
Like banks, money transmitters must monitor suspicious activity and report any instances of money laundering or other financial crime to FinCEN.
In September 2017, JP Morgan’s CEO Jamie Dimon called bitcoin a “fraud” and threatened to fire any employee who was caught trading it, according to Bloomberg.
Since then, Dimon has said he can see ways for the bank to use the underlying blockchain technology. Last year, JP Morgan said it was working on a token dubbed JPM Coin to speed up corporate payments using blockchain.
The change in treatment of crypto exchanges will not go unnoticed by Wall Street, especially not after macro investor and hedge fund manager Paul Tudor Jones told Bloomberg last week why he thinks owning Bitcoin as a hedge against upcoming inflation is a good idea.
“The best profit maximising strategy is to own the fastest horse,” said Jones. “If I am forced to forecast, my bet is it will be Bitcoin.”
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This is wildly inaccurate. Silvergate Bank from San Diego has been banking Crypto Exchanges for many years.