Why Jamie Dimon Fears Competition From Crypto Brokerages?

Whatever the business, would you like to compete with Jamie Dimon? Market signals say no, that Dimon would win.

If any of this is in doubt, readers need only consider what happened in 2024 when Dimon merely hinted at the possibility of an earlier-than-expected retirement. The $25 billion market capitalization for JPMorgan quickly disappeared.

It raises a useful question: what lines of business would JPMorgan enter if the myriad regulations that exist at the city, state, and federal levels were less stringent? To say that JPMorgan, Wells Fargo, Bank of America and other US banks would evolve quickly is hopefully a statement of the obvious.

National and international brands, all, their path into new areas of business would be smoother than for most. Factor in shareholder demands that they do it again without myriad restrictions and their rapid expansion would be a given.

What you’ve read so far is worth thinking about as critics of US banks criticize them for allegedly seeking limits on interest paid by stablecoin stores. Some will quickly jump in saying that Coinbase and others cannot pay interest on stablecoin deposits due to existing legislation. True, but the “rewards” in stablecoin holdings are interesting in all ways but name.

Banks are unhappy with the solution, and their critics claim that because they don’t want to compete, they’d rather not suffer “destructive competition” from stablecoin vaults that, if free to compete, would quickly put “struggling” banks out of business. Critics are missing the point. Dimon instructs on the matter.

The idea that he will be swept away by the competition belies the person who knows anyone who reads this. Dimon isn’t running away from the competition allegedly coming from crypto brokerages, but instead sees them trying to function as banks minus the endless rules and oversight that incumbent banks currently undergo.

The implication in heavy bank regulation is that as stewards of the savings of the American people, they require strict supervision. Wise minds can and will debate the previous claim, including your author here. The best regulation, by far, is competition.

By extension, banks – and the health of customer deposits – would be on much firmer ground if they were free to compete without restraint. This would include the regular purchase of those who cannot compete. Unfortunately, the world is not perfect, which means that US banks are once again forced to operate under a myriad of constraints.

The same is not expected for crypto brokerages, hence the frustration within the banks. If crypto brokerages want to take the risk of preserving client wealth, they should be willing to put up with what banks put up with. To which critics say no, that brokerages aren’t taking risks, that they aren’t even holding somewhat risky loans while backing their cryptocurrency deposits with dollars invested in Treasuries and other assets whose risk is low and easily observable. What is the point.

If we forget the risk associated with the dollar itself, we can’t forget that Silicon Valley Bank suffered an existential run just over three years ago, despite low Treasuries and other low-risk assets. What is the biggest point. Regulators do not know, nor did they know, what is and is not low risk. Neither do banks sometimes.

The biggest US banks recognize the above truth, that’s why they are big. More competition would make them even bigger or not, so let them compete with other banks, including crypto brokerages. If so, does anyone think Dimon would be afraid of new entrants to the banking sector?