The mother of all u-turns on bitcoin

Here is JP Morgan boss Jamie Dimon gearing up for a screeching u-turn.

“I don’t think you should smoke, but I defend your right to smoke,” says the man widely regarded as the most powerful banker in the world.

He takes a pause: “I defend your right to buy bitcoin. Go at it.”

This is quite a shift, since eight years earlier he said bitcoin was a “fraud”, “worse than tulip bulbs” and of use only to drug dealers and murderers.

“If we had a trader who traded bitcoin I’d fire him in a second for two reasons. One, it’s against our rules. Two, it’s stupid. You can’t have a business where people are going to invent a currency out of thin air,” he added. “It won’t end well… someone is going to get killed and then the government is going to come down on it.”

He declared himself shocked that anyone could possibly fail to see the crypto currency for what it is.

The price of bitcoin when he thought this was $4200. Today it trades at $117,692.

Hm. What can possibly have made him change his mind?

Bitcoin becoming mainstream has been a long time coming. And the only thing that has really happened to it is that the price has gone up.

The expectation from acolytes and early adopters was that by now it would be its own payment system.

We could use it at retailers. We could even be paid in bitcoin if we wanted, a problem for the taxman and perhaps the entire monetary system.

None of that has happened.

Trump and family have got involved in crypto, which doesn’t exactly tell you that Dimon’s original stance was wrong.

If it turns out the old Dimon had it right, this looks like a massive PR risk, since JPM is doing more than defending your right to smoke, it is encouraging you to do so.

Reportedly, it will start lending against crypto assets before long. JPM has no comment, which suggests it is leaving open the possibility of another change of heart.

It’s right to do that.

In the FT Rana Foroohar warns of the coming crypto crisis.

Political donors are calling for bitcoin to be given the shield of “regulation”.

She writes: “It’s all too reminiscent of 2000, when advocates for over-the-counter derivatives descended on Washington begging to be properly ‘regulated’ so that they could gift the world with financial ‘innovation’. What we got instead was a seven-fold increase in poorly regulated credit default swaps that culminated in the great financial crisis of 2008.”

This is a really big summer for bitcoin and its fans.

It might gain an air of respectability and become just another risky investment, like any tech stock.

You knew the risks, the marketers can later say.

If it does cause the sort of crash Foroohar and others are predicting, JP Morgan and others have a lot of explaining to do.

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Simon.english@roxhillmedia.com