Former JP Morgan Trader says Banks Failed to Innovate & Will Lose to Crypto
Since the dawn of the internet era the biggest innovation the banking sector has brought to consumers is internet banking, which is essentially just moving traditional services online. When you control the market, there is no incentive to innovate- it’s costly and unnecessary, so the banks kept bobbing along reaping the rewards of monopoly power. But now there is a new player in town: cryptocurrency.
Cryptocurrency has the potential to revolutionize how we use financial services. Through the removal of centralized, third party intermediaries like banks, consumers will gain full control of their financial assets through decentralized peer-to-peer payment networks. This will essentially make banks obsolete as a cheaper, more secure alternative now exists.
To put this into context, the State Bank of India is predicting that by 2030 traditional banking services could all but be replaced by blockchain technologies. But they won’t go down without a fight, oh no. As cryptocurrencies have gained awareness and traction, top banking executives like Jamie Dimon have labelled them a ‘fraud, scam or Ponzi scheme’. However, there are others within the finance industry who have seen the potential and are embracing the coming tide.
The Times they are a Changin’
In a recent interview with Business Insider, former head of JP Morgan’s energy trading department in New York Daniel Masters called cryptocurrencies ‘a financial true revolution’. Masters became interested in cryptocurrencies in 2014, when he shifted the concentration of his investment fund Global Advisors toward the crypto markets. He believes the current banking industry has become cumbersome and complacent, but they will pay the price as a result.
“Banks have sat on their laurels for 30 years. I just threw out my chequebook, it looks exactly the same as it did in 1985. Why should I still have it when I’m doing Uber instead of cabs, Airbnb instead of the Sheraton? They have absolutely failed to innovate in any way, shape, or form and now they’re paying the price.”
Other financiers have also began to wake up and hear the music, with the CBOE and CME launching futures markets for Bitcoin, as well as Goldman Sachs reportedly considering starting up cryptocurrency trading desks. Even old Jamie Dimon seems has partially apologized for his absurd statements!
Will the banks be able to catch up? The future remains uncertain, but one thing is for sure, cryptocurrencies are not going anywhere any time soon.