JP Morgan Chase just announced that they’re taking on two of the world’s top crypto exchanges as banking partners. Coinbase and Gemini, two of the most respected US exchanges in the world, are the exchanges that JP Morgan Chase has chosen to partner with.
What does this mean for crypto? A few things.
First, it does not mean that JP Morgan Chase is investing in Bitcoin, or any other cryptocurrency for that matter. There is no reason to believe JP Morgan Chase has even considered investing in cryptocurrencies.
But what it does mean is that one of the largest existential risks for the crypto industry has been solved. What is that existential risk? Regulation.
One of the biggest challenges facing all crypto exchange operators is securing banking partnerships. Banks have traditionally been very skeptical of crypto exchanges, because banking is a heavily regulated industry.
And for banks in America, the one priority they have over making money, is securing and retaining their banking charter. And in order for banks to retain their charter, they need to be able to prove to an auditor that they do in fact have the necessary customer info proving that there is no money laundering going on.
And for the longest time, this was difficult for crypto exchanges to accommodate. Tracking down the history of Bitcoin that was coming into a given exchange was, and still is a difficult task. This made it hard for exchanges to confirm that they aren’t supporting money-laundering.
Money-laundering has been a favorite critique among Bitcoin skeptics who say that the currency is basically only for drug-dealers and criminals, but with the partnership announcement from JP Morgan Chase, this argument falls apart.
It’s no longer believable that a majority of crypto transactions are criminal in nature, now that one of the nation’s most respected banks has announced they are providing banking services to crypto exchanges.
With this announcement, the crypto industry has effectively shown regulators across the world that it can comply with existing AML/KYC policies. This limits a government’s ability and willingness to shut down exchange operators, since one of the world’s largest banks has now approved both Coinbase and Gemini.
Finally, the perfect timing of this announcement coincides with the recent announcements that both Paul Tudor Jones and Jim Simons are getting Bitcoin exposure to complement their hedge fund portfolios, further improving the narrative that Bitcoin is a legitimate financial asset.