Yesterday Senator Elizabeth Warren used a Wall Street oversight hearing to whine about cryptocurrency.
At one point, almost as if a well-choreographed football play, she passed the ball to Jamie Dimon — CEO of JP Morgan Chase, the biggest bank in the world — to “explain why crypto is such an attractive financial tool for terrorists, drug traffickers, and rogue nations?”
It’s hard to imagine a more loaded question.
Mr. Dimon gleefully caught the pass and said:
“I’ve always been deeply opposed to crypto, Bitcoin, etc. You pointed out the only true use case for it is criminals, drug traffickers, anti-money laundering [sic], tax avoidance… because it doesn’t go through, as you mentioned, all these systems built up over many years — Know Your Customer, sanctions, OFAC [Office of Foreign Assets Control] — they can bypass all of that.”
What an astonishing display of complete and total ignorance on the part of Mr. Dimon and Ms. Warren.
This notion that Bitcoin is great for criminals is one of the most worn out, naive tropes about cryptocurrency that exists. Criminals can (and do) use virtually ANYTHING to launder money, conduct transactions, and extort their victims.
Fine art. Baseball cards. Government subsistence vouchers. Rare coins. Amazon gift cards. Popular consumer merchandise like iPhones. Sports betting. Prepaid credit cards. And yes, the US banking system.
At least with Bitcoin, every single transaction is publicly recorded on the blockchain, which means that government entities can track the movement of funds.
Frankly criminals are much better off using JPMorgan Chase for their illicit transactions.
Perhaps that’s why JPMorgan Chase was the bank of choice for Bernie Madoff, the man who ran one of the most infamous Ponzi schemes of all time. JPMorgan Chase facilitated decades of suspicious activities related Madoff’s fraud.
But that only scratches the surface of the bank’s involvement in criminality.
In 2020, JPMorgan Chase paid a $920 million criminal penalty for market manipulation, involving tens of thousands of fraudulent orders in precious metals and bond futures markets, which were placed and then canceled before execution.
And according to “the FinCEN files,” investigative reporters uncovered that JP Morgan “moved money for people and companies tied to the massive looting of public funds in Malaysia, Venezuela, and Ukraine.”
In total, JP Morgan may have facilitated over half a TRILLION dollars of money laundering between 1999 and 2017.
And you can find similar misdeeds across the banking industry.
For example, Wells Fargo’s rap sheet includes: forging customer signatures to open accounts in order to boost sales goals; selling unnecessary car insurance leading to 20,000 vehicle repossessions; a “software glitch” resulting in over 500 wrongful home foreclosures; overcharging 26x on foreign currency transactions; illegally repossessing military members’ vehicles; and actually selling customer Social Security Numbers to identity thieves.
It’s also interesting to note that Jamie Dimon was the “personal banker” of Adam Neumann, WeWork’s outrageously unethical founder.
Remember that Adam Neumann borrowed money from his company to buy office space, only to lease that office space back to the company at a profit, and bilk shareholders in the process.
He even changed the name of WeWork to We, then sold the rights to the word We to his own company for $6 million.
When WeWork tried to go public, JPMorgan Chase was its lead IPO advisor, but conveniently sold its $100 million stake just before the IPO crashed and burned.
Jamie Dimon was involved in all of this. But now he wants to take the moral high ground about crypto.
Do criminals use crypto? Of course, some criminals use crypto. Some criminals also use iPhones and fly on Delta Airlines. And some criminals have accounts at JPMorgan Chase.
Yet Dimon and Warren single out crypto, absurdly claiming that criminality is the “only” use case.
I doubt they’ve ever bothered to read the original white paper, in which the clearly stated intent of Bitcoin was to be a medium of exchange for online transactions — a common currency of the Internet.
Over time, however, Bitcoin has become a more speculative instrument… which is probably its biggest use case to date; plenty of people buy Bitcoin because they think it will go up in price. Or they use it as a long-term store of value.
Another major use case of crypto, of course, is the tokenization of financial contracts which eliminates middleman bankers like Jamie Dimon. So it’s no surprise that Mr. Dimon hates crypto.
But perhaps the most ridiculous thing he said at that hearing was, “If I was the government, I’d close it down.”
He seems to think that the government could simply ban cryptocurrency, and, poof, demand would vanish.
Because that worked so well during alcohol prohibition, or the never-ending war on drugs, or prohibiting illegal downloads of movies on the Internet.
Crypto would be even harder to control.
Cryptocurrency offers a decentralized, peer-to-peer currency which can travel across borders in seconds. That governments can’t control it is a feature, not a bug.
That means a future where people can’t be de-banked by Justin Trudeau for protesting against his vaccine mandates. It means keeping personal custody of your funds, without having to trust third parties like JPMorgan Chase who treat you like a criminal (when they aren’t too busy acting like criminals).
Jamie Dimon is supposed to be a sophisticated banker and business leader. Yet his words are steeped in so much irony, drenched in so much hypocrisy… and he doesn’t even realize it.
It is so obvious that significant elements of cryptocurrency are here to stay; even the Federal Reserve is toying with crypto.
So for Jamie Dimon to say “close it down” sounds like a guy shouting at windmills. Or worse — like a scarcity-minded medieval ruler in the Ottoman Empire banishing the printing press.
We’ll see what happens if Bitcoin continues rising; my guess is that JP Morgan will eventually start recommending their private clients buy crypto again… and Dimon will act like he knew it all along.