Follow the money! It’s a catchphrase that started in the 1976 classic “All the President’s Men.” When looking for the next industry that I think is prime for disruption, I followed the money. According to Fortune, in 2018, six of the top eleven most profitable companies in the world were financial institutions. Yikes!
One of the biggest disrupters to our banking system lately has been cryptocurrency – Bitcoin is the biggest player in this space today. Honestly, I know of cryptocurrency and Bitcoin, but I’m certainly not an expert. I feel a bit like Michael Banks, the little kid from Marry Poppins, while digging into this a bit.
Cryptocurrency is only online money, it’s not a government issue currency. However, isn’t all money today pretty much online? When was the last time you wrote more than 2 checks in a month? When was the last time you received a physical paycheck that you needed to take to a bank? In most cases, we receive an electronic deposit for work performed, we pay with credit cards, and we submit our credit card payments through our bank. It’s all online – most of the people I interact with carry very little cash.
Cryptocurrencies (like Bitcoin) use a decentralized system. They money doesn’t need to go in and out of a centralized bank to prove that $20 is $20. For checks and balances (making sure people are using legitimate bitcoins) there is a ledger called a blockchain. The blockchain is verified through “miners.” The miners go through the 1s, 0s and math that is way too difficult for me, to make sure that transactions used with bitcoins are the real deal. I think this video really simplifies the bitcoin process:
I think cryptocurrencies are likely to continue to disrupt the banking industry. Maybe this is why banks are now looking at creating their own cryptocurrencies too? .
A few years ago, JPMorgan Chase CEO, Jamie Dimon, was not a fan of bitcoin. He called it a “fraud.” This year the JPM Coin made its debut and JPMorgan Chase became the first American bank launch its own digital coin – the JPM Coin. Unlike other cryptocurrencies, Dimon Dimes (I just made that up), are equivalent to the US dollar. Bitcoins and other cryptocurrencies vary in value. For example, as I write this, one bitcoin is worth $8,520.
How about Zuck Bucks!? Earlier this fall, Facebook CEO Mark Zuckerberg testified before Congress to discuss Facebook Libra – a new cryptocurrency Facebook is hoping to launch. My recommendation to Mark Zuckerberg – first you need to have better answers when Rep. Alexandria Ocasio-Cortez starts grilling you in the hot seat! Since his appearance, Facebook has started pulling back from a Libra launch.
On Monday, Oct. 28, Bakkt (a cryptocurrency platform), said it was launching a consumer app with Starbucks as a partner. Could you soon pay for your grande with a crypto?
Chinese President Xi Jinping urged his country in October to take the lead in blockchain tech. That’s interesting considering blockchain is decentralized and that’s not exactly what the Chinese Government is known for. Also, China has banned cryptocurrencies since 2017
I don’t see the banks failing (again) because of something like this and I think Bitcoin has had too many issues over the years, but could cryptocurrencies disrupt the financial services industry? I think so and I think the banks are smart to get ahead of this!
What do you think?
Burdette, Kacy. “Global 500.” Fortune, Fortune, 30 July 2019, fortune.com/global500/2018/.
Egan, Matt. “Jamie Dimon Hated Bitcoin. Now JPMorgan Is Getting Ahead of the Crypto Revolution.” CNN, Cable News Network, 15 Feb. 2019, www.cnn.com/2019/02/15/investing/jpmorgan-bitcoin-crypto-jamie-dimon/index.html.
Merced, Michael J, and Nathaniel Popper. “JPMorgan Chase Moves to Be First Big U.S. Bank With Its Own Cryptocurrency.” The New York Times, The New York Times, 14 Feb. 2019, www.nytimes.com/2019/02/14/business/dealbook/jpmorgan-cryptocurrency-bitcoin.html.
Ou, Elaine. “Facebook’s Libra Currency Is Zuckerberg’s Attempt to Copy WeChat.” Bloomberg.com, Bloomberg, 24 Oct. 2019, www.bloomberg.com/opinion/articles/2019-10-24/facebook-s-libra-currency-is-zuckerberg-s-attempt-to-copy-wechat.
Perez, Yessi Bello. “A Quick Overview of Cryptocurrency Whales, Bears, and Bulls.” Hard Fork | The Next Web, 24 Oct. 2019, thenextweb.com/hardfork/2019/10/24/a-quick-overview-of-cryptocurrency-whales-bears-and-bulls/.