Forgive my cynicism, but after spending most of my working life in global financial markets where banks’ trading desks were my clients, I get nervous when a major bank or multinational corporation expresses an interest in something that interests me. In the case of a fledgling idea such as peer to peer digital currency that nervousness is compounded by awareness that, even if my cynicism is unwarranted and there is no nefarious motive to the interest expressed, giant corporations have a way of inadvertently smothering innovation from outside their own sphere of influence.
That is why, when I read a headline this week that suggested that JP Morgan (JPM) CEO Jamie Dimon had apparently said some nice things about Bitcoin technology, I was, to say the least, a little nervous. Dimon is quite famously dismissive of Bitcoin and anybody who wishes to see it develop to anything close to its full potential should hope that he and other Wall Street executives stay that way. So long as JP Morgan and other banks see Bitcoin as a crackpot idea doomed to failure they won’t waste time trying to kill it.
I shouldn’t have worried. The comments were contained in Dimon’s annual letter to shareholders and account for one paragraph found of page 29 of a 39 page document. Even that paragraph doesn’t say much; simply that the bank can learn a few things from Bitcoin and other new payment systems. As those familiar with digital currencies will be aware, Dimon is actually not talking about Bitcoin here, but about the blockchain, and that becomes clearer as he goes on to an attempt to justify charging 1 percent to move money around.
That distinction between Bitcoin and the blockchain is an important one. The currency itself may stay and strengthen or it may wither and die, but the challenge to the existing global payments system is most likely here to stay. The fact that banks who have for decades taken for granted their huge profits from these transactions now feel the need to defend them is proof positive of that.
This doesn’t mean, however, that the increasing interest in the blockchain from big business is a welcome thing. Those that support Bitcoin and the technology surrounding it are prone to see all attention that isn’t related to regulation as beneficial, but that isn’t the case. While increased acceptance is necessary if Bitcoin is to survive and thrive, much of that attention is becoming about usurping the existing technology rather than developing and working with it.
There was another example of that this week when it was reported that Samsung and IBM were developing an app that would extend Bitcoin technology to other areas. That is an interesting development, but we should all be wary of one thing. It is possible that, by embracing the technology, big business will destroy its very essence. Businesses exist for profit and that fundamental motivation, while fine in itself, is at odds with the peer to peer, technology sharing, trust based nature of Bitcoin. There are protections in place, but even the remote possibility that some aspects of the technology could become proprietary as big business gets involved is worrying.
The increasing number of big businesses expressing an interest in Bitcoin and its inherent technology is in many ways welcome, but it is a double edged sword. Until a major corporation begins to accept Bitcoin, hold it, and then use it for payment rather than immediately converting to fiat currency, interest doesn’t signify acceptance. In the meantime, companies attempting to piggy back on the blockchain technology will inevitably attempt to replace it with a proprietary version from which they can profit. If Bitcoin and the blockchain are to have a future, the community must be aware of and resist any such attempt.