JPMorgan Extends Banking Services to Bitcoin Exchanges
May 12 2020 - 7:29AM
Dow Jones News
By Paul Vigna
JPMorgan Chase & Co. has taken on two well-known bitcoin
exchanges, Coinbase Inc. and Gemini Trust Co., as banking
customers, according to people familiar with the matter, the first
time the bank has accepted clients from the cryptocurrency
industry.
The move is the latest in a string of positive developments for
bitcoin and another sign that Wall Street is becoming more
comfortable with the business of cryptocurrencies.
Coinbase, founded in 2012, is the largest U.S.-based bitcoin
exchange, with more than 30 million accounts. Gemini, founded in
2014 by Tyler and Cameron Winklevoss, is a smaller exchange, but it
has been in the vanguard of the industry's movement to attract
mainstream clients and embrace regulation.
The accounts were approved in April, and transactions are just
starting to be processed, the people said.
The bank is primarily providing cash-management services to the
firms and handling dollar-based transactions for the exchanges'
U.S.-based customers, according to the people. It will process wire
transfers, and deposits and withdrawals through the Automated
Clearing House network, an electronic funds-transfer system.
Although Coinbase and Gemini are built around trading
cryptocurrencies, many of their customers link traditional bank
accounts to their accounts on the exchanges. Handling transfers in
and out of those bank accounts requires a payments processor.
JPMorgan's services don't extend to any bitcoin or
cryptocurrency-based transactions. The firms handle those
themselves.
What is notable is that JPMorgan was willing to extend services
to businesses built around bitcoin. Such businesses have for years
been blocked by banks from opening up accounts. Bankers were
concerned with exposing themselves to bitcoin's shadier uses, like
money laundering, and the added glare from regulators.
Coinbase and Gemini had to go through a long vetting process to
get JPMorgan's approval, the people said. What separates the
exchanges from others in the space is the degree to which they have
become regulated entities. The fact that both are regulated by
multiple parties played a big part in the approval process.
Gemini obtained a trust charter from the New York State
Department of Financial Services in 2015. Coinbase is registered as
a money services business with Financial Crimes Enforcement
Network, or FinCEN, and also has a specialized license for crypto
businesses, called the BitLicense, from the DFS. Both are licensed
as money transmitters in multiple states.
Bitcoin has had a run of good news lately. The price has more
than doubled from its March lows, recently touching $10,000, though
it is still more than two years removed from its all-time high of
$19,800. Trading volumes hit record highs in April and March as
investors became interested in the digital currency as a hedge
against volatility in traditional markets.
Meanwhile, more Wall Street traders are in the market as well.
Average daily trading volume this year of CME's bitcoin futures
contract has risen 43% from the same time frame a year ago, the
exchange said. Nearly 850 new accounts have been opened this year,
more than twice as many as a year ago. Popular vehicles for
institutional investors, including the Grayscale Bitcoin Trust, an
over-the-counter ETF, have seen increased activity as well.
For JPMorgan, the new relationship with Coinbase and Gemini is
the latest step in what has been a long and sometimes acrimonious
relationship with digital money. Chief Executive Jamie Dimon has
been a high-profile critic of bitcoin in the past. But the bank
itself experimented extensively with blockchain, bitcoin's
underlying technology, and more recently implemented its own
digital currency, JPM Coin, for digital payments among its
clients.
Write to Paul Vigna at paul.vigna@wsj.com
(END) Dow Jones Newswires
May 12, 2020 07:14 ET (11:14 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.
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