Earlier this week, JPMorgan hosted its Investor Day. It was a fairly long event, as these type of annual events tend to be. Around the middle of the broadcast, as I was about to fall asleep, they started to talk about Bitcoin and blockchain. It was an awkward moment that woke me up in a hurry!
For those who are not in the know, JPMorgan’s CEO, Jamie Dimon, has been an outspoken critic of Bitcoin. In September 2017, Dimon called Bitcoin a fraud and predicted that the government will crack down on it. A month later, Dimon said, “If you’re stupid enough to buy it, you’ll pay the price for it one day.” But for some mysterious reason (wink wink, it has to do with making money), in January 2018, Dimon said he “regrets” calling Bitcoin a fraud.
In the transcript below from the Investor Day, we learned that Dimon is not backing down from his critical comments, but his people “begged him” to stop talking about Bitcoin. Awkward. To the relief of more serious investors, the topic quickly turned to his views on the blockchain technology.
JPMorgan Chase (NYSE: JPM) Analyst Day, February 27th 2018
Analyst: Hi. So you made some colorful comments about Bitcoin a while back. I think you retracted them.
Jamie Dimon: I did not retract them.
Analyst: OK… So…
Jamie Dimon: I said I regret having said it. Not the same thing. And that’s all I’m going to say about Bitcoin because they begged me not to say anything because somehow it’s all people talk about if you talk about it and it’s basically irrelevant to JPMorgan Chase.
[Topic changes to blockchain]
The way I would look at that – first I will look at both digital, blockchain, this has been going on forever. We are using technology to do a better job for clients. So if you go back years ago, my dad became a broker, used to call in the order to the post at the New York Stock Exchange. They’d write it down. They go to do the order, they call you back, we bought your shares and then all these tickets had to go to paying the agents, the transfer agents, the counterparts and stuff like that and of course it’s all digitized now. The cost of that is pennies as opposed to $0.35 a share, straight through processing, lower error rates, that’s true for all of our businesses. It’s been for big computers, it’s been for data, it’s been for fraud and digital is just the next wave of technology transforming businesses and making it cheaper.
Blockchain is a technology and we already use it in several areas, but the thing about blockchain is remember because I think you thought there was permission, you’ve got to get approval. So let’s say our firms wanted to do, to use blockchain to make it cheaper to do loan trading, which we think will happen to just document it and who gets the custodies and what the covenants are and corporate actions all in one place and at reduced rates. But you still have to get – you’ll have to sit together and actually decide what the protocols are going to be. Then we have to write the code. Then we have to test it.
So I think the blockchain will be rolled out as people can do those things and groups come together, set up the protocols and find a way to do it. It will continue to do. It’s been happening anyway the last 50 years that technology is going to drive down the cost of doing business. Maybe it’ll ramp it up a little bit. I don’t know. We’ll see. And it’s not usable in all cases. It takes – so far, you guys have told me, it takes 10 minutes to finish a blockchain, which makes it impossible to use for equity trading, when you do a thousand trades or FX rates in a second. And so you’ve got to look at where it’s going to be used or not used for. We’re very optimistic it would be one way we can drive down costs. But so will faster computers, so will the cloud, so will GPUs from the video, so will Big Data, so will bots, so will ML, all that’s going to help drive down costs.