The Fintech Files: JPMorgan’s blockchain chief on why ‘most crypto is still junk’
Back in February, Umar Farooq, the head of JPMorgan’s blockchain arm told Onyx Financial news that crypto was still in its “Napster age” – in other words, it has a long way to go to maturity.
Since then, the industry has been humbled by an era-defining market crash, which has hollowed out a once-bloated sector. So does Farooq think it has made great strides?
Apparently not. In a panel discussion with the Monetary Authority of Singapore on August 29, the Onyx CEO said that financial institutions are still being held back from getting into crypto due to a lack of regulation.
“The use cases haven’t fully emerged and regulation hasn’t caught up,” he said. “That’s why you see the financial services industry in general is a little slow to catch up.”
Still, many TradFi giants are preparing for regulators to get their act together. BlackRock recently partnered with Coinbase to offer crypto trading services to its institutional clients, while Abrdn and Fidelity have also made moves into the space.
Farooq added: “Most crypto is actually still garbage. With the exception of, I’d say, a few dozen tokens, everything else mentioned is either noise or just going to disappear.”
Furthermore, the JPMorgan CEO said that crypto has not reached a stage where it can be used on a large scale for “serious transactions” between financial institutions.
Instead, Farooq said it remains primarily a vehicle for speculative investment. Cryptos need to “mature so that you can actually do things with them”, he said.
“Right now, we’re just not there yet.” See the entire panel debate here.
His comments echo those of Morningstar’s CEO, Kunal Kapoor, who recently said United Nations that cryptocurrencies “have not proven their case to the masses”.
In an interview on August 25, he said: “I personally think the lack of stability and predictability is a concern.”
“The limited use and support says something to me, that the prices of cryptos increase when there is war and people are trying to get their money out of the country.”
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Lessons from the crypto winter
BlockFi was for a while one of the most talked about participants in the recent crypto crash.
The buzz reached a fever pitch a day after fellow lender Celsius closed all branches, as Zac Prince’s company let go a fifth of his staff.
Many in the market wondered: would BlockFi be the next domino to fall?
In the end, it survived—with the help of a $250 million loan from FTX CEO Sam Bankman-Fried.
Now Prince has written a comment about what he has learned from the episode.
First, he writes, “disciplined risk management” must be embedded in the culture of a company.
Secondly, companies must be financially transparent.
“It can be painful to miss opportunities for growth,” adds Prince. “But unsustainable growth at all costs is, as we’ve seen, a recipe for collapse.”
And third, companies must comply with regulators, whose support can be obtained “only through active dialogue, compliance and partnership”.
These things sound reasonable – although traditional CFOs may well read these and wonder: if these are new guidelines, what on earth was BlockFi doing before?
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On the same day as JPMorgan’s Farooq’s comments, Monetary Authority of Singapore CEO Ravi Menon said he will take further steps to limit retail investors’ access to crypto. The Financial Times reports that he will introduce “further measures to reduce consumer harm”.
Meanwhile, luxury brands like Gucci and Tiffany have defied crypto crashes to dive headlong into non-fungible token projects. Bloomberg ask why these brands are so bullish on NFTs.
And finally, sex work and crypto have been closely linked for years – but that could change. Coindesk has a long read on why the two might fall out of bed with each other.
The last word
“Crypto bro” culture is a problem, says Sendi Young, the European head of blockchain payments giant Ripple.
Talking to United Nations in a recent interview, Young, one of the most powerful women in an extremely male-dominated industry, warned:
“With crypto at this intersection of financial services and technology, both of which are typically white-male-dominated industries, there is a real threat that we could repeat the same mistakes as those industries.”
Read the entire interview here.
To contact the author of this story with feedback or news, email Alex Daniel
