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Bitcoin is a fraud that will blow up, says JP Morgan boss

The Guardian logo The Guardian 13/09/2017 Angela Monaghan

Watch: What is Bitcoin? (Newsweek)

Bitcoin is a fraud that will ultimately blow up, according to the JP Morgan boss Jamie Dimon, who said the digital currency was only fit for use by drug dealers, murderers and people living in places such as North Korea.

Speaking at a banking conference in New York, Dimon said he would fire “in a second” anyone at the investment bank found to be trading in bitcoin. “For two reasons: it’s against our rules, and they’re stupid. And both are dangerous.”

He added: “The currency isn’t going to work. You can’t have a business where people can invent a currency out of thin air and think that people who are buying it are really smart.

A single bitcoin stands in front of a collection of bitcoins: The bitcoin cryptocurrency has more than quadrupled in value since December to more than $4,100. © Bloomberg via Getty Images The bitcoin cryptocurrency has more than quadrupled in value since December to more than $4,100.

Related: Bitcoin investors could lose all their money, FCA warns

“If you were in Venezuela or Ecuador or North Korea or a bunch of parts like that, or if you were a drug dealer, a murderer, stuff like that, you are better off doing it in bitcoin than US dollars,” he said. “So there may be a market for that, but it’d be a limited market.”

Bitcoin is a virtual currency that emerged in the aftermath of the financial crisis. It allows people to bypass banks and traditional payment processes to pay for goods and services. Banks and other financial institutions have been concerned about bitcoin’s early associations with money laundering and online crime.

It has more than quadrupled in value since December to more than $4,100, although it is not backed by any government. It fell by 4% after Dimon’s comments.

Related: Cryptocurrency boom stalls as regulators focus on ICOs

“It is worse than tulip bulbs,” Dimon said, referring to a famous market bubble from the 1600s. He predicted big losses for those investing in bitcoin. “Don’t ask me to short it. It could be at $20,000 before this happens, but it will eventually blow up,” he said. “Honestly, I am just shocked that anyone can’t see it for what it is.”

However, the banker revealed his daughter had bought bitcoin: “It went up and she thinks she’s a genius now.”

Dimon’s criticism of the currency coincided with a warning from the UK financial regulator against a speculative frenzy over initial coin offerings (ICOs) in cryptocurrencies such as bitcoin.

The FCA said anyone investing in ICOs should be prepared to lose all their money. “ICOs are very high-risk, speculative investments,” it said. “You should be conscious of the risks involved … and prepared to lose your entire stake.”

ICOs are designed to raise money for internet-based startups. Instead of raising funds from the public in pounds, euros or dollars, investors in ICOs pay in cryptocurrencies. In return, they are issued with a “coin” or “token” that is in effect their share in the firm.

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