An open letter to Jamie Dimon, by Farzam Ehsani - TechCentral

An open letter to Jamie Dimon, by Farzam Ehsani

Jamie Dimon, the CEO of JPMorgan Chase, has called bitcoin a “fraud”. Image c/o Steve Jurvetson

Dear Mr Dimon,

A few days ago, you called bitcoin and cryptocurrencies a “fraud”. You said bitcoin is “not a real thing” and that governments “would close it down”. I understand your perspective and, in fact, I shared a similar view a few years ago. Then I decided to look into bitcoin. To my surprise, I discovered one of the most beautiful and ingenious monetary systems known to mankind.

I’ve realised that a lot of the confusion surrounding bitcoin comes from the lack of understanding of what money truly is. We use money every day but very rarely sit back and ask ourselves what it is and why it has value. Let’s take the US$100 bill. It’s a piece of paper with some security features and a government stamp on it that costs $0.155 to produce. Yet we can exchange that piece of paper for things that take significantly more time and energy to create. Furthermore, the Federal Reserve also creates digital US dollars out of thin air to buy financial assets like government bonds and mortgage-backed securities (a truth that hides behind the illusive term “quantitative easing”). In this light, would we say that the US dollar is then a “real thing”? Or would we classify the US dollar as a “fraud”?

Perhaps no money is real and it’s just a myth that we humans have created for ourselves as a tool to manage the allocation of the scarce resources of our planet. If that’s the case, then perhaps bitcoin and cryptocurrencies are just a better story, a better myth, which perform the functions of this tool we call money better than any previous form of money we’ve ever known. After all, cryptocurrencies can be kept scarce (a prerequisite of any form of money) and can be held and transferred across borders at a fraction of the cost of traditional financial channels without needing to trust any institution or individual. Indeed, with the advent of cryptocurrencies, the concept of a cross-border payment has become as absurd as the concept of a cross-border e-mail.

Now let’s consider what “closing down” a cryptocurrency like bitcoin would entail. Bitcoin is a protocol, a distributed and decentralised language that a network of participants has decided to speak. There is no CEO of bitcoin, no headquarters of bitcoin, no owner of the bitcoin network, just like there is no CEO, headquarters or owner of the English language. Just imagine how difficult it would be to “close down” the English language, or any other language for that matter. Where would one even start? The only way to effectively close down a cryptocurrency would be to turn off the Internet. There aren’t many countries I know that are prepared to do this.

Why ban?

A government may, therefore, consider a ban, as some have already tried. But why do this? Because “it is used for illicit purposes”, you say. The fact of the matter is that much more illicit activity has been facilitated through the US dollar than any cryptocurrency. This hasn’t led us to conclude that a ban on the US dollar is the right thing to do. But let’s for a moment assume that a government does want to ban a cryptocurrency because they “like to control the currency”, as you’ve stated. The problem here is that this would just push cryptocurrencies underground, completely out of the purview of a financial regulator. I believe it is far better to legitimise cryptocurrencies and try to regulate the flows into and out of a national currency that a government has control over, than not to have sight of them at all.

As countries grapple with what cryptocurrencies are and what they mean for their financial systems, many are beginning to understand that this is a force that is better harnessed than opposed. In 2014, Russia planned to ban bitcoin, then reconsidered this decision and is now planning to recognise and regulate it in 2018. This past week, Russian finance minister Anton Siluanov said: “The state understands indeed that cryptocurrencies are real. There is no sense in banning them. There is a need to regulate them.” In April, Japan officially declared bitcoin a legal payment mechanism. And a few days ago, economists at the Central Bank of Finland went a step further, declaring bitcoin “revolutionary” and stating: “Bitcoin is not regulated. It cannot be regulated. There is no need to regulate it.”

Mr Dimon, there are a couple of trends sweeping the world at present. One is that people are starting to lose trust and confidence in the very institutions that are meant to embody these attributes. The second is that humanity is starting to question another myth we’ve created for ourselves: man-made national borders. Cryptocurrencies pay no heed to the latter and provide a way for many to take control of their own financial sovereignty in a system that many are not happy with today. It may be easy to disregard an asset class that is currently valued at just over $100bn when you lead an institution that has a balance sheet of $2.5 trillion. But things change quickly, Mr Dimon.

Respectfully,
Farzam Ehsani

  • Farzam Ehsani is blockchain lead at Rand Merchant Bank and chairman of the South African Financial Blockchain Consortium

17 Comments

  1. Well done, a well written and factual letter that gets my thumbs up. Of course America, as the holder of the Dollar – the world currency – has a vested interest in supressing any other currency that may threaten its power and control. If you had the world’s biggest money printing press would you also not feel threatened by bitcoin etc? Makes perfect sense to me. Sadly the truth is there is another economic collapse coming soon, one that will most likely be like nothing we have ever seen before. The rumblings are there. Once these signs manifest there will be a massive run on cryptos, leaving the traditional stock market and banking sector close to ruin. Mr Dimon is trying to limit this now, and to a certain extent it is working, however in the long run all he has done is create awareness and investigating minds.

  2. Of course Dimon calls cryptocurrencies a fraud. There’s no need for banks like JP Morgan any longer.

  3. I like how this article synthesizes disparate streams of thought I have been reading the past week and brings them all together in one place, nicely done!

  4. Embrace our Banana Republic on

    Man-made national borders? You have clearly never been to a place like South Sudan or any of the war-torn regions in the world. All countries and governments have their flaws. But some do build roads, hospitals, schools, universities and so forth to make your life somewhat better. They also employ police officers and military personnel to protect you and keep you safe from those who want to force their way in and upset your comfy life. Yes they make mistakes but the benefits of what the do far outweighs these mistakes. Bitcoin will be detrimental to society and the world in ways that we can not even imagine at the moment. Why do we want to give criminals and terrorists a new and “better” anonymous way to go about their business? I can think of no legal reason why you want to embrace a cryptocurrency apart from trying to make a quick buck.

  5. Robert Robotronic on

    You might find it useful to learn about the global debt bubble and it’s impending collapse. You might also find it useful to learn about the nature of money and how central banks have created tens of trillions of dollars worth from thin air since 2008 – also consider how this has been affecting you and people around you. Please consider the long-term consequences of the ongoing “debt monetization” by all the major central banks around the globe at this time. Money as you have come to know it is about to cease to exist. Bitcoin is a new *kind* of money. Unlike the fiat money you’re used to, Bitcoin has all the properties of “good money” – durable, portable, fungible, recognizable, divisible, rare, and difficult/impossible to counterfeit. It’s your financial future, so it is your responsibility.

  6. Embrace our Banana Republic on

    Would you sell a brand new Ferrari and accept 50 old cars that will not gain any value as payment?

    Why are the current owners of Bitcoin accepting “old school money” in exchange for bitcoin? Are they not trading down? Why would they prefer dollars, euros and pounds?

    Why are the anonymous people with a lot of Bitcoin selling their coin? Surely it would be better to keep it? Or are they not sure about the future of bitcoin?

    I have bought and sold a lot of assets in my life.
    When I buy an asset i ask this question: “Why is the owner selling this?
    I ask the same question in reverse when i sell something.

    Why are the big Bitcoin owners selling their Bitcoin?

    This is a pyramid scheme my friend.

    A fool and his money are soon parted.

  7. Embrace our Banana Republic on

    Who financed your house/car/iphone? Or do you live in a RDP house?
    It is quite a bold statement to say we do not need banks anymore.
    Seriously dude think before you type!

  8. Embrace our Banana Republic on

    Sell your house and buy a couple of million rands worth of Bitcoin and then tell me it is the future. How much have you “invested” in Bitcoin?

    Stop using these currencies to paint pictures of unicorns and rainbows for our futures.
    I can 100% guarantee you that the problems in our current system will pop-up in your new system as well. But there will also be new and horrifying problems that we can not even imagine now.

  9. That 100% you speak of is the human factor, nothing is going to change corruption, greed, wars etc besides a wake up call internally. Bitcoin cannot solve that issue, I do not propose it will. I’ll stop painting pictures of rainbows etc if you stop painting your “horrifying problems” pictures? Maybe we can meet somewhere in the middle and paint our rendition of The Scream together…for we both have no idea how things are going to pan out in 10 or even 1 year from now

  10. Embrace our Banana Republic on

    Thanks I had quite a chuckle at my own cynicism for a moment there.
    The concept of digital currency is not new. I hardly ever use cash.

    Here is my biggest question:

    Would you sell a brand new Ferrari and accept 50 old cars that will not gain any value as payment for it? (Assuming the Ferrari and the 50 cars are of equal present value)

    Why are the current owners of large amounts of Bitcoin accepting “old school money” in exchange for bitcoin? Are they not trading down? Why would they prefer dollars, euros and pounds?

    There is a basic principle in life: Do not sell assets for less than what they are worth. The people that have a lot of Bitcoin prefer real money. That is why they are selling it for real money.

  11. Banks of course. But in the future, credit and loans will not need banks… Just smart contracts on blockchain technology at much lower prices. Even existing banks are looking to blockchain solutions.
    Remember chequebooks? See any around today? Same with cash and walk-in banks. They will disappear.

  12. Embrace our Banana Republic on

    FYI Robert.

    I have been dealing with money and large scale investments for more than 15 years so I do know a thing or two about how money works and how it ebbs and flows.

    And global debt bubbles are also not a new thing. They have been around since Ancient Egypt perhaps before that. I have to admit that the scale has increased somewhat but principles remain the same.

  13. Embrace our Banana Republic on

    Don’t misunderstand me I am quite open to anonymity and anarchy.
    Survival of the fittest! I have the means to survive.

    But who will educate the poor and illiterate masses in our country? They do not even fully understand the current system? How about people living in Mozambique without electricity and cell phones where it takes a farmer a year to save up enough money to buy a bicycle? Do we leave them behind?

    Using this new system you will be able use use the same account to pay for an AK47, your children’s school fees and an underaged prostitue. It will all be anonymous untraceable transactions. Yes you can do all of those thing at the moment using cash but it will become a thousand times easier.

    How will SARS replace the R 15 000 a month I pay in TAX when I start using an anonymous ewallet?

  14. All valid questions and concerns. However they exist today. Blockchain introduces “triple-entry” accounting which will change the very foundations of our economic system. It is a completely “trustless” system (no trust required). No need for bank or auditor intermediaries to provide trust. No need for centralised transaction clearing houses for cross-border transactions.
    And for the poor unbanked? All they will need is a cellphone and digital wallet. Payments for any amount will be made at vendors who have QR code readers (and yes even street vendors will have them).
    Where do you think banks get money to lend out for mortgages, cars and iPhones? Please don’t tell me you think it comes from depositors. Our present banking system is archaic, expensive and inherently crooked. It relies on debt (yours and mine) to survive in order to create credit. It must and will change whether they like it or not.
    Sorry Jamie Dimon but your days are numbered… In binary on blockchains.