Banks Tried to Murder Cryptocurrency, but They Failed. Now They’re Experimenting with It

Cryptocurrency, the agency argues, is an existential threat to banks. The traditional banking industry has long been dismissive of crypto. Jamie Dimon, CEO of JP Morgan Chase, famously called Bitcoin a ” fraud” in 2017 and said people who invest in it are ” stupid.” It was before Dimon changed his tune in January 2018, saying he regretted calling Bitcoin a fraud and that the blockchain technology underpinning cryptocurrencies ” is real .”

The about-face came after his bank launched its cryptocurrency.) Looking back, it seems like bankers weren’t just misinformed; they were scared.

But banks are starting to overcome their fear of crypto. Goldman Sachs, the investment bank once described as a ” vampire squid” by journalist Matt Taibbi, has said it is clearing Bitcoin futures on behalf of its clients and opening a cryptocurrency trading desk. And tech giants like Facebook and Fidelity are diving into crypto too.

Earlier this month, Facebook announced it would launch an internal blockchain division to explore the creation of its cryptocurrency. (The company’s head of messaging products, David Marcus, will lead the new division.)

Fidelity Investments has been mining Bitcoin and Ethereum since 2015, and this January, it became one of the first major financial firms to allow clients to view their crypto holdings alongside their stock portfolios.

Pot shops are lining up to find banking providers, even as financial industry leaders warn them of the risks associated with handling cash—and cash-based businesses in general.

Cryptocurrency, a different animal entirely from cash, represents a promising new way for the pot industry to store value and make payments. “It’s not going to be long before cryptocurrencies become part of the financial services mainstream,” says Tom Adams, managing director at Budding & Co., an advisory firm specializing in mergers and acquisitions in the cannabis industry. “If an entrepreneur doesn’t accept that fact, they are going to be left behind.”

In countries like Japan and South Korea – where cryptocurrencies can be used at many businesses – there’s a chance the technology will become part of people’s everyday lives.

Cryptocurrency is also becoming more accessible to ordinary investors. A new company called Abra allows people to buy cryptocurrencies like Bitcoin and Ethereum through their banks or credit cards by providing a virtual “wallet” for storing the funds.

Another app, Robinhood, enables users in five states to trade Bitcoin and other cryptocurrencies without fees. Finally, check out the dogecoin millionaire biz.

Industry insiders are excited about the possibilities. “I’m very bullish on the future of cryptocurrencies in general,” says Alan Brochstein, founder of New Cannabis Ventures, a news and information service for the cannabis industry. “It’s just another form of money. It could be used for anything—online transactions, remittances, or retail purchases.”

However, he adds one big caveat: “I am bearish on Bitcoin’s future—or any potential cryptocurrency that is more focused on speculation than actual utility. It will be hard to get the average consumer to adopt a payment system where prices fluctuate by 20 percent within an hour or two.”

The cannabis industry, meanwhile, is already embracing the notion of transacting in cryptocurrencies. “PotCoin has grown very quickly because there’s a need for it,” says Shawn Moniz, co-founder of Portland-based POSaBIT, which allows people to pay for the pot using their bank accounts at brick-and-mortar dispensaries. Since launching in 2015, it has processed more than 20 million transactions.

In Colorado, where recreational cannabis has been legal since 2012, the state’s Department of Revenue released a memo regarding cryptocurrency payments in 2015. In 2016, a Colorado-based company called Altitude Products created an online ordering and payment system that lets people pay for legal weed through their local dispensary by credit card or cash. Cannabis dispensaries and retailers in Washington and California have also adopted the system known as Altitude Organic.

There is no FDIC insurance for cryptocurrency exchanges, and the companies that run them can be hacked or shut down, as was the case with BTER, which lost about $1.75 million in cryptocurrency in 2015. Over the past year, three of Japan’s leading bitcoin exchanges have also collapsed; two filed for bankruptcy protection while one was hacked and forced to file for bankruptcy.