JP Morgan’s crypto wallet timing couldn’t be worse

The Wall Street bank clearly has a love/hate relationship with crypto.

Image source: Unsplash.

JP Morgan is moving deeper into the cryptocurrency space. The Wall Street bank has received the green light from the US Patent and Trademark Office for its new crypto wallet trademark, the J.P. Morgan Wallet. Jamie Dimon is sure looking bullish on crypto for a CEO who has been nothing but critical of bitcoin. 

Emin Gün Sirer, founder and CEO of Ava Labs, told AltFi he is not surprised by JP Morgan’s move, saying: 

“The world is clearly headed towards the increased digitization of assets, and JP Morgan must realize that it needs to be present in the blockchain business in order to survive.” 

However, the optics around the timing of the filing were disappointing. 

“What is perhaps slightly surprising is that this patent must have been filed a few years ago when JP Morgan’s CEO Dimon was actively criticizing Bitcoin and cryptocurrencies in public. It’s never a good look to say one thing and do its exact opposite,” said Gün Sirer. 

The bank filed its crypto wallet patent back in July 2020 and received the regulatory nod on 15 November. Among the features the new wallet targets include:  

• Crypto payment processing
• Electronic transfer of virtual currencies
• Exchange of virtual currencies

The registration also covers legacy-based financial services such as credit and cash card payment processing. It could just be that the J.P. Morgan Wallet supports the bank’s corporate blockchain efforts, Onyx, but perhaps they also have a potential bitcoin wallet in their sights. 

Either way, the bank’s decision to muscle its way into the crypto wallet space sends a message to the industry that it wants to compete. JPMorgan is potentially looking to do so by offering crypto custody services to an industry that has been burned by trusting centralized parties with digital assets. Its timing is not great. 

The failure of cryptocurrency exchange FTX is still fresh in the minds of cryptocurrency investors. With the disgraced trading platform on the hook for over $3bn, crypto custody has been thrust into the spotlight. Market influencers are reminding the cryptocurrency community of a saying that gained traction in the industry’s early days — ‘not your keys, not your coins.’

Gün Sirer explained: 

“On the technical front, this patent seems to be custodial in nature and comes at a time when we just witnessed FTX, a de facto custodian, fail. We expect that self-custodial wallets, such as Core, will be on the rise as people try to avoid intermediaries. So it looks to a techie like JPMorgan has some catching up to do.” 

In crypto, self-custody is the Holy grail, allowing investors to control private keys that give them access to their digital assets 24/7. After all, Satoshi Nakamoto bemoaned the trust-based model, favoring instead peer-to-peer. Nakamoto said in his Bitcoin whitepaper: 

“What is needed is an electronic payment system based on cryptographic proof instead of trust, allowing any two willing parties to transact directly with each other without the need for a trusted third party.“ 

However, that’s not to say there aren’t risks associated with self-custody, too, such as losing one’s private keys or cybersecurity threats, to name a couple. Meanwhile, the broader cryptocurrency industry hasn’t shunned centralization altogether, either. 

Consider the ways of bitcoin billionaires Tyler and Cameron Winklevoss, founders of cryptocurrency exchange Gemini. They famously stored their private keys in safe deposit boxes across regional banks sprinkled throughout the Midwest before taking a sledgehammer to the computers that traced their steps. This sends a message that people really do trust banks to keep things safe despite a lack of trust in the Fed’s monetary policy. 

While several major cryptocurrency exchanges are centralized, such as Binance and Coinbase, they are native to crypto. JP Morgan is not. Sure, a J.P. Morgan Wallet has the potential to attract more people outside of the crypto space who are leery about controlling their own funds. However, it is not likely to woo a crypto community that has options across decentralized exchanges and self-custody wallets.