Top banker debates cryptocurrency use, requests shutdown and government regulation

7 views 6:52 am 0 Comments December 19, 2023
image

One of the nation’s leading voices in banking says he’s against cryptocurrencies and wants to see the industry shut down.

JPMorgan Chase CEO Jamie Dimon told lawmakers during a Senate hearing Wednesday that “the only true use case” for crypto is for criminal trafficking, money laundering, tax avoidance and the like.

Dimon said criminals are attracted to crypto because they can move money instantaneously and more anonymously while bypassing long-standing regulated financial systems.

“If I was the governments, I’d close it down,” he said.

Dimon was responding to a question from Sen. Elizabeth Warren, who is advocating for greater controls over the crypto industry.

She and a bipartisan group of lawmakers are pushing for a bill they say would crack down on crypto’s use in criminal activity.

They say the bill, the Digital Asset Anti-Money Laundering Act, could give regulators the tools they need to stop the flow of crypto to bad actors.

“Today’s terrorists have a new way to get around the Bank Secrecy Act: cryptocurrency,” Warren said at the hearing with banking leaders. “Last year, an estimated $20 billion in illicit crypto transactions funded every kind of dangerous criminal.”

Crypto’s reputation has certainly taken some hits lately.

FTX founder Sam Bankman-Fried was convicted of fraud.

Binance, the world’s largest cryptocurrency exchange, settled for over $4 billion with the U.S. government over what Treasury Secretary Janet Yellen said were “failures (that) allowed money to flow to terrorists, cybercriminals, and child abusers through its platform.”

And the Securities and Exchange Commission has taken a number of actions against crypto operators. SEC Chair Gary Gensler has said crypto “is a field rife with fraud, scams, bankruptcies, and money laundering.”

One crypto expert said JPMorgan’s leader “is mostly right” about his assessment of the decentralized digital currency industry.

Cryptocurrencies are often used to evade government controls and oversights, said Leonard Kostovetsky, an associate professor of at Baruch College in New York.

Though Kostovetsky said Dimon also “has selfish reasons to want to get rid of cryptocurrency” as the CEO of a major bank.

“… So, he is probably not the best messenger for banning it,” Kostovetsky said via email.

Crypto can be useful for legal purposes, such as storing value in a way that governments can’t erode through inflation, Kostovetsky said. That’s especially valuable in more corrupt areas of the world where governments print money to finance expenditures without caring about the effect on households, he said.

But Kostovetsky said there’s no way to fully regulate crypto, and its decentralized nature inherently attracts criminal activity.

“There is no way around this, and no way to solve this,” he said.

Regulators can make it harder for law-abiding citizens to get access to crypto by shutting down exchanges and markets, he said.

But criminals will still find ways to swap crypto or convert it into government-backed currencies, even if increased scrutiny from authorities leads to higher transaction costs for bad actors.

“Given their absolute requirement to avoid government scrutiny, criminals will happily pay those higher costs,” he said.

The crypto industry faces a number of threats, not just from criminal exploitation, Kostovetsky said.

It will need to find wider appeal and show it has everyday, practical uses.

But, Kostovetsky said, “The biggest threat, in my opinion, is that cryptocurrency prices will eventually crash, similar to the meme-stocks from a couple of years ago, and then almost no one other than criminals will be interested in using them or investing in them.”