Cryptocurrencies could prove disruptive to JPMorgan Chase & Co.'s business model by drawing customers away from its payment processing services and possibly other offerings, according to the firm's annual 10-K filing with the SEC. The document, submitted on February 27, covers the fiscal year ending December 31, 2017, and reads:
"Both financial institutions and their non-banking competitors face the risk that payment processing and other services could be disrupted by technologies, such as cryptocurrencies, that require no intermediation. New technologies have required and could require JPMorgan Chase to spend more to modify or adapt its products to attract and retain clients and customers or to match products and services offered by its competitors, including technology companies."
In other words, people may eventually develop a preference for cryptocurrencies, which require no financial intermediary to ensure their safekeeping, over forms of wealth that must be entrusted to an institution like J.P. Morgan.
Furthermore, in a possible future where virtual currencies have won significant mainstream adoption, J.P. Morgan may not be naturally positioned to offer the kinds of services that consumers want. To remain relevant, the company projects that it might have to spend a significant amount of money in order to compete with non-traditional financial products and services that may otherwise entice its clientele to part ways with the old institution.
For several years, cryptocurrency enthusiasts have gloated over the possibility that digital assets could eventually make banks and other financial institutions obsolete. Some of these individuals were whipped into a frenzy of social media activity when J.P. Morgan CEO Jamie Dimon called bitcoin "a fraud," a comment that he later reported regretting.
Dimon has also spoken positively of blockchain technology, and the company he heads is developing a permissioned, Ethereum-based blockchain platform called Quorum.
On February 22, Bank of America (BofA) filed its own 10-K with the SEC and, like J.P. Morgan's, that document also referred to potential challenges relating to cryptocurrency. These include difficulties in complying with KYC and AML rules when dealing with digital assets; losing business to less risk-averse companies that are willing to "engage in business or offer products in areas we deem speculative or risky, such as cryptocurrencies;" and (like J.P. Morgan) the potential need to spend large sums while attempting to keep up with shifting technological norms.