Last week, at a banking conference hosted by Barclays, JPMorgan CEO Jamie Dimon condemned bitcoin and offered ill-founded arguments to delegitimze bitcoin. Dimon went as far to state that governments should close or shut down bitcoin as a whole.
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Many mainstream news networks including CNBC that covered the event criticized Dimon for his comments on bitcoin and his clear lack of knowledge in bitcoin and cryptocurrencies in general. Brian Kelly, a long-time CNBC analyst and prominent portfolio manager, stated on CNBC’s Fast Money:
“I think Jamie Dimon is wrong. One, the genie is out of the bottle here. And also, Dimon talked about how governments are going to shut it down. Bitcoin is designed to go around governments. That is exactly what it was designed for and you are starting to see that. Jamie even said in his comments that if you are in Venezuela, it might be good to use bitcoin to go around the government, which is exactly the point.”
Kelly emphasized that Dimon directly contradicted his point by justifying the purpose of bitcoin in regions like Venezuela that have poor banking standards and unreliable financial service providers. More importantly, Kelly depicted Dimon’s misunderstanding of the decentralized nature of bitcoin. If Venezuelan users can utilize bitcoin to send transactions as a way to go around the government, so can users in the US, Europe and Asia. Because the structure of bitcoin and all of the relevant people that operate bitcoin including miners, node operators and developers are distributed, it is virtually not possible to shut bitcoin down.
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At the conference in which Dimon spoke, Chamath Palihapitiya, a prominent venture capitalist and the owner of the Golden State Warriors, also refuted Dimon’s claims. Palihapitiya dismissed Dimon’s criticism of bitcoin and his description of the digital currency as a “fraud,” as he stated:
“Absolutely not [bitcoin is not a fraud]. It cannot be a fraud. What countries can constrain today is how it [bitcoin] is effectively traded but it cannot be controlled. It is a fundamentally distributed system that exists peer to peer. And so to the extent that you can basically eliminate the will and the actions of every single person in the world, you can eliminate it. But in the absence of that, the genie is fundamentally out of the bottle.”
Palihapitiya’s explanation and praise on bitcoin and its structure was very similar to that of the Bank of Finland. In its latest research discussion paper, Bank of Finland, the central bank of Finland, encouraged economists to study the “marvelous” structure of bitcoin. JPMorgan and many other financial institutions have been working to create blockchain-based systems. Yet, after billions of dollars in investment, not a single successful commercial blockchain system has been released. That is because they lack the decentralized nature of bitcoin.
More importantly, as bitcoin expert Andreas Antonopoulos previously explained, bitcoin synergizes with other technologies such as Schnorr signatures, advanced elliptic curve applications and ring signatures. The blockchain merely operates as a database system within bitcoin. Hence, when Dimon stated that governments should close down bitcoin, he likely thought under the premise that bitcoin’s blockchain is operated by a central entity as many permissioned blockchain networks are.
But, an increasing number of traders and casual investors are beginning to appreciate the decentralization of bitcoin. In fact, trusted sources including bitcoin developer Andrew DeSantis and bitcoin investor IamNomad revealed that various bank accounts of JPMorgan Securities Ltd. purchased bitcoin earlier this week. Analyst Tone Vays stated that it was likely the clients of JPMorgan that bought massive amounts of bitcoin through a bitcoin exchange traded note provider in the Swedish stock market.
Despite the strong condemnation on bitcoin by the CEO of JPMorgan and other well respected economists such as Peter Schiff, a rapidly increasing number of people are starting to understand what bitcoin is, what it offers and what it is capable of. It is not a centralized platform which governments can shut down, it is a decentralized financial system that will co-exist with the global banking industry until it becomes the global financial network.