that
he
was
extremely
skeptical
that
Bitcoin would ever amount to
anything real. Dimon said
that once Bitcoin companies
had to follow the same rules
as banks, when it comes to
money
laundering
and
compliance,
“that
will
probably be the end of them.”
Barry
Silbert
knew
Dimon personally. When he
saw
Dimon’s
comments
about Bitcoin, he quickly e-
mailed Dimon a link to the
pro-Bitcoin essay that Marc
Andreessen had written in the
New York Times. A few days
later, Dimon called Silbert.
Dimon had clearly read
Andreessen’s
essay
and
sympathized with the view
that virtual currencies could
provide some opportunity for
people outside the United
States who didn’t have access
to good banks.
But Dimon responded that
the potential of Bitcoin was
not going to be enough to
convince
government
officials to allow a competing
currency to exist. Dimon
knew what it was like to work
in an industry that came
under
government
supervision. Once Bitcoin
came
under
similar
regulation, it would require
all the same fees and rules
that bothered people in the
traditional financial system.
He didn’t dismiss Barry’s
arguments,
though,
and
invited him to come in and
present Bitcoin to some of
JPMorgan
Chase’s
executives.
Dimon’s perspective was
representative of a broader
shift in the banking industry’s
mind-set since the financial
crisis. Before the mortgage
meltdown had nearly brought
down the American economy,
Wall Street had hired some of
the best young minds in the
world and tasked them with
finding innovative ways to
make money. When many of
those
clever
innovations
ended up contributing to the
economic collapse, the banks
that survived were made
keenly
aware
of
how
financial
experimentation
could go awry. What’s more,
regulators put in place a raft
of new rules that forced banks
to think twice before taking
unnecessary risks. Just as
important,
government
officials were forcing banks
to pay billions of dollars in
fines for past infractions. Few
banks
paid
as
high
a
monetary price as JPMorgan.
By the time Dimon and
Silbert
talked,
the
most
important characteristic of
any
new
business
for
JPMorgan was not how much
money it would make, but
how it would sit with
regulators. JPMorgan had
gone further than most in
pulling back from potentially
risky activity. During 2013 it
had stopped working with
remittance companies, check
cashers, and even student-
loan providers, not because it
had to, but because it didn’t
want the headache. Other
banks were taking similar, if
less aggressive, steps.
As the comments at
Lawsky’s hearing suggested,
this was nearly the opposite
of the attitude in Silicon
Valley, which had not been
implicated in the financial
crisis. The tech industry was
increasingly confident about
its own ability to change the
world, emboldened by the
success of companies like
Apple,
Google,
and
Facebook. Some of the most
popular tech companies were
ones such as Airbnb and Uber
that
openly
challenged
cumbersome regulations like
those imposed on hotels and
taxis.
In
the
financial
networks that Bitcoin was
hoping to challenge, tech
investors like Fred Wilson
saw just another set of
regulations that could be
disrupted to create a more
efficient market. If anything,
the financial industry seemed
even more open to disruption
because
the
incumbent
businesses were so afraid of
breaking the rules.
Wences, who had been
working at the intersection of
technology and finance for
two decades, acknowledged
that for most of his career the
center of power and wealth in
the
United
States,
and
perhaps even the world, had
been the financial industry
and, specifically, New York.
But he was outspoken in his
belief that this was about to
change.
“It’s likely that the next
twenty or thirty years are
going to be the same for
Silicon Valley,” he liked to
say. “In no other area are we
going to see the passing of
the baton so clearly as with
Bitcoin.”
The only problem for the
Silicon Valley disrupters was
that they still relied on banks
to hold the dollars they used
to pay their employees—and,
in the case of Bitcoin
companies, the dollars they
received from customers to
pay for the virtual currency.
Wences
Casares
had
always used JPMorgan Chase
as the bank for his previous
startups—he had maintained
an allegiance to the bank after
it had given his first startup
an account back in the 1990s.
Now, though, when Wences
applied to JPMorgan to open
an account for his new
company, Xapo, he was, for
the first time, turned down.
He found another bank that
initially opened a corporate
account for Xapo, but then
shut it down right before
Wences
received
a
$10
million check from his new
investors, the venture-capital
firm Benchmark. Wences was
in the unusual position of
having an enormous check
and no one willing to accept
it. He was eventually saved
by Silicon Valley Bank, the
same bank that was holding
money for Coinbase and the
only
bank
showing
any
willingness to work with
Bitcoin companies.
In the long run, though,
Wences assured everyone he
knew that the cautiousness of
the banks would matter less
and less. At an event hosted
by JPMorgan in the Valley, to
discuss Bitcoin, Wences was
dismissive when the topic of
Jamie Dimon came up:
“I think whatever Jamie
does or doesn’t do will be as
relevant
as
what
the
postmaster general did or
didn’t do about e-mail.”
CHAPTER 29
February 2014
Mark
Karpeles
was
spending many of his days in
early 2014 in a space on the
ground floor of the Tokyo
office building that housed
Mt. Gox. Mark was turning
the space into what he called
the Bitcoin Café, a real-world
showcase for Bitcoin in