Ethereum News Update
Reports surfaced on Friday that JPMorgan Chase & Co. (NYSE:JPM) is thinking of spinning off its “Quorum” blockchain division into a separate company. Is this good for cryptocurrencies like Ethereum? Is it bad?
Let’s take a closer look…
Quorum is JPMorgan’s attempt to build a blockchain. You can think of it as a corporate version of Ethereum, with the noticeable difference being that Quorum is a permissioned blockchain and Ethereum is not. This subtle difference limits innovation on Quorum by dictating who can or cannot write to its blockchain.
JPMorgan is “still in the early days” of making this decision, but according to Reuters and the Financial Times, making Quorum its own company would “increase the platform’s appeal.” Would it really, though?
JPMorgan seems to have a hot-and-cold relationship with the idea of blockchain technology. It wasn’t too long ago that JPMorgan’s CEO, Jamie Dimon, proclaimed that Bitcoin was a “fraud.”
He had to walk back that statement a few months later, not least because his firm was working on similar technology, but it doesn’t change the fact that he said it in 2017. His attitude was completely dismissive.
Then, two prominent analysts at JPMorgan wrote a report citing Ethereum and Ripple as important innovations in financial technology. One month after that, the bank included a note in its financial statements citing cryptocurrencies as a potential threat to their business.
All of these mixed signals have investors confused. To me, JPMorgan’s hot-and-cold attitude simply looks like risk management.
Think about it: JPMorgan is a massive, highly leveraged firm operating in an industry that collapsed a decade ago. No one wants to see that collapse repeated. But, at the same time, the bank wants to dip its toes in emerging technology lest they get disrupted by blockchain.
The obvious solution is to:
- Start a permissioned blockchain.
- Use JPM’s brand name to generate interest.
- Spin it off to protect JPM’s financial stability.
- Use the subsidiary to undercut emerging competitors.
- Hold on to existing power.
Jamie Dimon is a smart guy. Soon after he made his “fraud” comments, I wrote that he might be downplaying his blockchain expectations on purpose. He may have wanted to discredit his competitors while bolstering his own blockchain offerings.
That said, the Ethereum Enterprise Alliance (EEA) has a massive headstart. It has the talent and buy-in to compete with a juggernaut like JPM, so this news doesn’t derail our $1,500 Ethereum price forecast for Q2.