Jamie Dimon, the CEO of JPMorgan Chase, has made his contempt for cryptocurrency clear, calling it “nugatory” through the nice crypto growth in October 2021. However now, he says, he has stopped even calling them “currencies.”
“Currencies have guidelines of regulation behind them, central banks and tax authorities,” Dimon mentioned in an interview with the Greek information outlet Ekathimerini. “I name them crypto-tokens.”
Strictly talking, Dimon is simply partly right. In financial principle, the type of foreign money he means—backed by governments and their companies—is commonly known as “fiat cash.” However earlier than there was fiat cash, there was foreign money as a broadly agreed medium of trade: Cowrie shells, as an example, have been as soon as used as foreign money so broadly throughout India, China, and Africa that the fashionable Ghanaian foreign money, the cedi, comes from the native phrase for “cowrie shell.”
Currencies don’t essentially have to be backed by central banks to operate as a medium of trade; in truth, the champions of crypto say that the worth of cryptocurrency lies exactly in that lack of centralized management.
How cryptocurrency fails as foreign money
The place Dimon has a degree, although, is within the different two features of currencies: to facilitate trade for items and providers, and to retailer worth. Bitcoin might purchase you a espresso in El Salvador, and ethereum might purchase you an NFT itemizing on OpenSea, however such use instances are nonetheless uncommon. The primary factor crypto could be exchanged for is fiat foreign money.
And whereas cryptocurrencies do retailer worth, they do it much less reliably than the greenback or different fiat currencies. The worth of bitcoin fell 46% between November 2021 and January 2022. If a fiat foreign money was ever that unstable, its customers can be in extreme bother.
To that finish, Dimon additionally claimed he didn’t perceive crypto property and urged different individuals don’t both: “You’ve seen that, within the final couple of months, they’ve misplaced half their worth within the US market,” he added.
When Dimon calls cryptocurrencies “tokens,” he’s casting them as particular varieties of tradable or fungible property with restricted utility. Crypto-enthusiasts consider tokens as a subset of all cryptocurrency. Dimon is telling them that cryptocurrency is already a lot narrower and extra restricted than they’d wish to consider.