The Timing Of JP Morgan’s Crypto Wallet Could Not Be Worse
The Wall Street bank has a love-hate relationship with cryptocurrencies.
JP Morgan is expanding its presence in the bitcoin market. The US Patent and Brand Office has approved the Wall Street bank’s new crypto wallet trademark, the J.P. Morgan Wallet. Jamie Dimon seems enthusiastic about crypto for a CEO who has been nothing but dismissive of bitcoin.
The founder and CEO of Ava Labs, Emin Gün Sirer, told AltFi that he is not shocked by JP Morgan’s action, stating:
“The world is clearly headed towards the increased digitization of assets, and JP Morgan must realize that it needs to be present in the blockchain business in order to survive.”
However, the timing of the filing was disappointing from an aesthetic standpoint.
“What is perhaps slightly surprising is that this patent must have been filed a few years ago when JP Morgan’s CEO Dimon was actively criticizing Bitcoin and cryptocurrencies in public. It’s never a good look to say one thing and do its exact opposite,” said Gün Sirer.
The bank submitted its crypto wallet patent application in July 2020 and gained regulatory approval on November 15. Among the characteristics targeted by the new wallet are: Cryptographic payment processing, Transfer of virtual currency electronically, and Exchange of virtual currencies
The registration also includes legacy-based financial services, such as processing credit and debit card payments. Onyx, the J.P. Morgan Wallet, may serve the bank’s corporate blockchain initiatives, but they may also have a bitcoin wallet in mind.
In any case, the bank’s move to enter the crypto wallet market signals to the sector that it intends to compete. JPMorgan may seek to do this by providing crypto custody services to an industry burnt by centralized parties with digital assets. Its timing could be better.
The fall of the cryptocurrency exchange FTX is still fresh in cryptocurrency investors’ minds. Cryptocurrency custody has been forced into the limelight due to the discredited trading platform’s $3 billion debt. Influential market participants are reminding the cryptocurrency community of a phrase that gained popularity in the early days of the industry: “not your keys, not your coins.”
Gün Sirer explained:
“On the technical front, this patent seems to be custodial in nature and comes at a time when we just witnessed FTX, a de facto custodian, fail. We expect that self-custodial wallets, such as Core, will be on the rise as people try to avoid intermediaries. So it looks to a techie like JPMorgan has some catching up to do.”
Self-custody is the Holy Grail of cryptocurrency, enabling investors to hold the private keys that provide them with 24/7 access to their digital assets. Satoshi Nakamoto disapproved of the trust-based paradigm, preferring peer-to-peer instead. Nakamoto said in his whitepaper on Bitcoin:
“What is needed is an electronic payment system based on cryptographic proof instead of trust, allowing any two willing parties to transact directly with each other without the need for a trusted third party. “
Nevertheless, there are hazards connected with self-custody, including the loss of private keys and cybersecurity concerns, to mention a few. Meanwhile, the wider bitcoin sector has accepted centralization.
Consider the practices of bitcoin millionaires Tyler and Cameron Winklevoss, who established the cryptocurrency exchange Gemini. They infamously hid their secret keys in safe deposit boxes scattered around regional banks in the Midwest before smashing the computers that tracked their movements with a sledgehammer. Individuals trust banks to keep their assets secure despite a lack of faith in the Fed’s monetary policies.
While most large cryptocurrency exchanges, such as Binance and Coinbase, are centralized, they are crypto-native. JP Morgan is not the case. Indeed, a J.P. Morgan Wallet has the potential to attract more individuals from outside the cryptocurrency industry who are wary about handling their cash. Nevertheless, it is unlikely to attract a crypto community with access to decentralized exchanges and self-custody wallets.
