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Protocol | Fintech
The people, power and politics of fintech, every Tuesday and Friday.
October 15, 2021
Hello and welcome to Protocol | Fintech! This Friday: Jamie Dimon's bitcoin bashing, GoHenry's founder on fintech's responsibility, and Putin on crypto in energy trading.
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The Big Story
Jamie Dimon's bitcoin blues
JPMorgan Chase CEO Jamie Dimon is back doing what he's become famous for (or infamous, depending on where you stand): bashing bitcoin.
But the Wall Street exec may also be realizing he can't stand in the way of what his clients want.
"I personally think that bitcoin is worthless," Dimon said Monday during an Institute of International Finance event. It's sort of a daring statement given bitcoin's value climbed to $57,000 in the past week.
- Dimon's remark is hardly surprising. He's become known for his gloomy view of bitcoin and crypto through the years. "No government will ever support a virtual currency that goes around borders and doesn't have the same controls," he said in 2015.
- Two years later, he called bitcoin a "fraud" and "worse than tulip bulbs." He said he would fire JPMorgan employees trading in bitcoin for being "stupid."
- That 2017 rant caused a bit of a stir, which apparently led Dimon to back off a bit. "I'm not going to talk about bitcoin anymore," he said on one earnings call. Marianne Lake, then the bank's CFO, stepped in to clarify that JPMorgan actually was "open-minded for digital currencies that are properly controlled and regulated."
But Dimon conceded that his clients want in. "I don't care. It makes no difference to me," he said this week as he affirmed what the JPMorgan CFO said in 2017: That the Wall Street giant, despite Dimon's bitcoin skepticism, has started to dip its toes in crypto — because of customer demand.
- "Our clients are adults," he said. "They disagree [with me]. That's what makes markets. So, if they want to have access to buy yourself bitcoin, we can't custody it but we can give them legitimate, as clean as possible, access."
- And that's pretty much the growing consensus on Wall Street. One of JPMorgan's main competitors pretty much conceded that it has no choice but deal with crypto: "I don't think crypto is a fad," Morgan Stanley CEO James Gorman said on an earnings call this week. "I don't think it's going to go away."
- It's evident that Dimon "doesn't believe in decentralized finance that isn't backed by a government," Robert Siegel, a management lecturer at the Stanford Graduate School of Business, told Protocol. But "bitcoin is all about speculation right now," he added. And "money is made during times of speculation."
And ultimately, money talks. "It's got no intrinsic value," Dimon also said of bitcoin last week in an interview with Axios. But that fact has become increasingly irrelevant. Wall Street — and Dimon — simply can't ignore an asset class that now has a market cap of more than $1 trillion. "Just because someone thinks something is a pile of [bleep] doesn't mean they can't make money on it," Siegel said.
-- Benjamin Pimentel
A MESSAGE FROM ALLOY
Identity verification is something financial institutions know they need to get right, but many fintech companies aren't sure if they should build a solution in-house or buy one. Alloy digs into whether building or buying is right for you based on your organization's needs and use case.
From Protocol | Fintech
Robinhood to SEC: Gamification? It's free speech. The trading app said the First Amendment could limit any effort to regulate its "digital engagement practices."
A cast of blockchains want to take down Ethereum. Solana, Avalanche and others are challenging what has become the default blockchain for developers.
A16z has six proposals for the future of crypto. The Silicon Valley VC firm outlined what it thinks policymakers should do to adapt to the fast growing technology trend.
Coinbase will start offering NFTs. The crypto marketplace wants to reach the "creator economy."
- "There is definitely a different standard applied to someone like me... I am an easy target: an immigrant, a woman, a minority. I don't look like your typical comptroller of the currency, I have a different history. I am easy to demonise and vilify." —Saule Omarova spoke out on critics of her nomination to head the Office of the Comptroller of the Currency.
- "Cryptocurrency, of course, can be a unit of account, but it's not stable. To transfer money from one place to another — even trade, moreover trade energy resources — in my opinion, it's still premature." —Russian President Vladimir Putin takes a dim view on cryptocurrency's potential use in energy trading.
- "We think that we must maintain orthodoxy in the management of finances [and] not try to innovate much in financial management." —Mexican President Andrés Manuel López Obrador told a reporter that Mexico is unlikely to adopt bitcoin as legal tender.
4 Questions With …
Dean Brauer, co-founder and U.S. president, GoHenry
GoHenry is a financial education and tech company geared to 6- to 18-year-olds.
What fintech trend are you most excited about, besides your own sector?
I know lots of people are carefully watching the Decentralized Finance space. It's really exciting to think of what might be possible there. There is also some exciting stuff still happening in the digital banking space; while it is not new, it continues to be interesting to see how folks are thinking of new value propositions for niche audiences. Not unlike financial literacy, there are unconventional digital banks giving access to financial services that traditional banks have ignored.
What fintech trend is most troubling for you?
This question reminds me of the quote "with great power comes great responsibility." Fintech unlocks access to new fields but it doesn't necessarily prepare you for them. Take, for instance, fintech companies leveraging technology to democratize access to financial markets. This is great because it's never been easier for retail investors to access the stock market and start thinking of building long-term wealth. But for every wonderful story of how it's never been easier to learn about and participate in the stock market, there are pitfalls ... Think about it, people who barely understand how to balance a checkbook or the concept of personal finance are now "gambling" on the markets. Overall it feels like a net positive, but it's also a reminder we have some ways to go to ensure that before that access happens, there is education and tools to ensure people are building their money confidence while taking calculated risks.
What's been your biggest professional blunder, and how did it help you?
[Laughs] Too many to count. Struggle well and fail forward. I'm yet to make the same mistake twice!
What problem would you like to see a fintech company solve?
I'll give you two answers, one because it's in vogue. I hope someone makes it easier to purchase an NFT! The wallets are still a bit fiddly. The other problem is larger: I'm excited to see the innovations that will exist due to our aging population. There is a lot of innovation required in the adult caregiving space, and no doubt we'll start to see some interesting stuff in the financial caregiving space.
Need to Know
- A new fund will let retail investors back startups. The founders of secondary startup marketplace Forge Global launched a new company called D/XYZ, which has a $100 million investment portfolio that it plans to list as a closed-end ETF.
- JPMorgan launched payments for small businesses. Chase Payment Solutions is a combination of Chase Merchant Services and WePay, which Chase bought in 2017.
- FIS has a hyper-targeted Worldpay campaign. If you didn't know FIS bought Worldpay — and you're one of 13 top accounts — then it has a campaign targeted just for you.
- Square is now funding artists through Cash App Studios, with a focus on musicians and those in fashion or filmmaking.
- Stripe is hiring a crypto team. The payments infrastructure software giant is giving more attention to crypto, three years after it dropped support for bitcoin.
- Coinbase wants Congress to keep the SEC out of crypto. The crypto marketplace reportedly plans to propose the creation of a new regulatory body for digital assets.
- Michael Rihani is joining Square as crypto product lead. He previously worked on the Tesla Supercharger, Apple Card and Apple Pay.
- The CFPB made four big personnel changes. Zixta Martinez will be deputy director, overseeing the Operations Division. Karen Andre will be associate director for consumer education and external affairs. Jan Singelmann is returning to the CFPB as chief of staff. And Erie Meyer is returning to the CFPB as chief technologist.
- Tala raised $145 million to bring crypto to emerging markets. It has a consumer credit app for the unbanked that allows them to borrow up to $500. Lending company Upstart led the round.
- German neobank N26 is seeking an $8 billion valuation. Coatue, Third Point Capital and Dragoneer are set to lead the $800 million round.
- Global Processing Services raised $300 million. The API payment processor has customers including Revolut, Curve and Starling Bank.
A MESSAGE FROM ALLOY
Still not convinced you need to purchase an identity decisioning platform? Check out Alloy's ROI calculator to see how purchasing an identity decisioning platform will affect your bottom line. You can even plug in your own data, so you can easily make a business case.
The increase in the number of Citi customers accessing accounts via mobile, compared to pre-pandemic levels.
Thanks for reading — see you Tuesday!