Amber Baldet, the former executive director of JPMorgan Chase’s BlockChain Center of Excellence (BCOE), says that major banks like JPMorgan could be setting up cryptocurrency trading desks “sooner than people probably think.”
In an interview on CNBC's “Power Lunch”, Baldet was asked how long it would take for one of the big banks to unveil their crypto desk. She replied:
“I think it's coming sooner than people probably think. But even where the will is, the legal and regulatory framework is challenging. And custody is a huge challenge.”
There are three parts to Baldet’s answer. And she is right about all three parts.
First, with regards to “coming sooner than people probably think”, of the big Wall Street banks, while most have steered clear of cryptocurrencies while warmly embracing the underlying blockchain technologies, we have already seen reports that Goldman Sachs is busy setting up its Bitcoin trading operation based on the huge demand from its clients.
Even JPMorgan Chase, Baldet’s former employer, whose CEO Jamie Dimon called Bitcoin “a fraud” in September 2017, five months later admitted in a 71-page report by its Global Research team titled “Decrypting Cryptocurrencies: Technology, Applications and Challenges” — nicknamed the “Bitcoin Bible” — that cryptocurrencies are “unlikely to disappear completely, and could easily survive in varying forms and shapes among players who desire greater decentralization, peer-to-peer networks and anonymity.”
Second, it is definitely true that the “legal and regulatory framework is challenging.” The chairman of the U.S. Securities and Exchange Commission (SEC), Jay Clayton, seems to believe that whether or not a crypto asset is classifed as a security depends “on the characteristics and use of that particular asset.”
Then we have the U.S. Commodity Futures Trading Commission (CFTC) CFTC, which ruled as early as September 2015 that “Bitcoin and other virtual currencies are properly defined as commodities,” a decision that was backed by U.S. District Court Judge Jack Weinstein in March 2018.
As for the U.S. tax authority, the Internal Revenue Service (IRS), it stated in a notice issued in February 2014 that for federal tax purposes, “virtual currency is treated as property.”
Of course, the confusion regarding how the SEC will classify tokens distributed through ICOs has been a major bearish influence in the cryptocurrency markets lately, but it seems reasonable to believe the hearings that the SEC is holding at the moment will lead to some clarity within the next few months.
Finally, with regards to the custody, once again, Baldert is right in that “custody is a huge challenge.” However, the good news is that institutional-grade custody services have started to appear. As covered here on CryptoGlobe, on 15 May 2018, both the Japan-based global investment bank Nomura and U.S. crypto exchange Coinbase announced new crypto asset custody ventures. And given the pent-up demand from institutional investors for such a service, many more major players are bound to enter this market soon.
Baldert, who left JPMorgan at the beginning of April, has teamed up with Patrick Mylund Nielsen to co-found a new venture, a startup called Clovyr, which is aiming to build something akin to an app store for decentralized apps built using blockchain technology.
Featured Image Credit: “JPMorgan Chase Tower” by “eflon” via Flickr; licensed under “CC BY 2.0”
