Why JPMorgan may offer crypto loans despite CEO Dimon's bitcoin doubts

Business Standard

6 days ago

JPMorgan Chase is exploring the idea of lending directly against clients' cryptocurrency holdings, such as bitcoin and ethereum, the Financial Times reported. This would be a significant move for the US headquartered bank and reflects a growing acceptance of digital assets within the traditional banking system. The bank could begin such lending as early as next year, although the plans are still under discussion and may change, the news report said.
Why is this move surprising for JPMorgan's CEO Jamie Dimon?
The potential policy shift marks a major turnaround for JPMorgan CEO Jamie Dimon. Eight years ago, Dimon called bitcoin a 'fraud' and said it would 'eventually blow up'. He also claimed it was mainly used by 'drug dealers and murderers', and even threatened to fire any trader caught dealing in bitcoin.
However, Dimon has recently softened his stance. Speaking in May this year, he said, 'I don't think you should smoke, but I defend your right to smoke. I defend your right to buy bitcoin. Go at it.' His earlier strong opposition put off some clients who had earned their wealth through crypto or were long-term supporters of its potential.
What steps has JPMorgan already taken in crypto?
JPMorgan has gradually taken steps to engage with the crypto space. It already plans to offer loans backed by crypto exchange-traded fund (ETF) holdings — a more regulated way to gain crypto exposure, the news report said. Lending against the actual crypto assets themselves would be a bigger leap, especially as rival banks like Goldman Sachs still do not accept crypto as collateral.
Why are more banks warming up to crypto now?
The shift in attitude among big banks is partly due to a changing political climate. A possible second Trump administration is seen as more favourable to light-touch crypto regulation than President Joe Biden's.
On July 18, President Donald Trump signed the GENIUS Act (Guiding and Establishing National Innovation for US Stablecoins). This is the country's first federal framework for regulating stablecoins. The act requires full reserve backing in liquid assets, regular audits, and stronger consumer protections. Large banks welcomed the legislation as it provides regulatory clarity and makes it easier for them to engage with digital assets.
What makes stablecoins different from other cryptocurrencies?
Stablecoins are a type of digital asset pegged to a stable reference, like the US dollar. Unlike cryptocurrencies like bitcoin — which are highly volatile and not backed by tangible assets — stablecoins are designed to maintain a consistent value.
They are used widely in payment systems, particularly in regions with limited or poor banking infrastructure.
Stablecoins also play a key role in decentralised finance (DeFi) ecosystems, like:
-Serve as collateral for crypto-backed loans.
-Support liquidity in decentralised exchanges and lending protocols.
-Help users hedge against cryptocurrency price volatility.
What challenges does JPMorgan face in lending against crypto?
One of the major hurdles is figuring out how to handle digital assets seized from clients who default on their loans. Cryptocurrencies require specific custody solutions, and most banks, including JPMorgan, do not hold crypto directly on their balance sheets.
To solve this, JPMorgan would likely partner with a third-party custodian — companies like Coinbase, which offer secure storage for crypto on behalf of institutional clients, the news report said.