Bitcoin Can Only Act As A Hedge Against A Loss Of Confidence In Fiat And Payment System: JPMorgan
- From calling Bitcoin a “fraud” to the crypto asset having a place in investors' portfolio
- “2019 will be remembered for the rise of digital money” – JPMorgan Chase Report
- Blockchain has its “clearest” use case in “payments, trade finance, and custodial services” but not in supply chain
According to JP Morgan Chase and Co.’s 74-page report later this week states, the digital money will change the financial world.
“2019 will be remembered for the rise of digital money,” the bank said in its report. “The groundwork is now in place for more mainstream adoption of blockchain technology at the same time that the foundation is being established for the development of digital currency and fast payments.”
Back in 2017 JPMorgan CEO Jamie Dimon called Bitcoin a “fraud” and now in 2020, the bank says crypto assets have a place in investors' portfolio. JPMorgan report said,
“Developments over the past year have not altered our reservations about the limited role that cryptocurrencies play in global portfolio diversification or as a hedge instrument. Crypto assets have a place in investors’ portfolios only as a hedge against a loss of confidence in both the domestic currency and the payments system.”
Rapid adoption faces practical challenges
The New York-based bank said in its report that the emergence of blockchain that underpins Bitcoin and Ether has made the modernization of payments global. While JPMorgan debuted its very own digital coin last year to facilitate cross border payments with a digital asset among the banks, the blockchain system created by Paxos has broken through to the real world and China is developing digital yuan, noted the bank.
It further said blockchain is promising for corporations and banks, yet most corporate efforts are in the early development stage or being tested.
When it comes to using blockchain, JPMorgan sees its “clearest” use cases in “payments, trade finance, and custodial services.” But founds using a distributed ledger to manage the supply chain — “viewed as ripe for disruption is often a limiting factor” — to be a fading application.
However, challenges still remain in the form of technology such as scaling and slow network and regulatory unclarity.
Tech giants are also jumping in on the trend with Facebook launching its so-called cryptocurrency Libra pegged by a basket of fiat currencies. However, it received a lot of backlash from European officials and members of Congress.
“The failed release of Facebook’s Libra serves as a reminder that rapid adoption faces practical challenges to attain scale,” the bank said in the report. In order to succeed, the bank said Libra needs several market mechanisms in place such as less distributed, semi-private networks and short-term liquidity facilities.