Crypto enthusiasts lash out at JP Morgan's clueless fiat support

Crypto enthusiasts lash out at JP Morgan’s clueless fiat support

A little more than a week ago, netizens were given inside access to a JPMorgan Chase document indicating that there is definitely a lot of back-and-forth conversation at the financial giant on what is going to happen with the cryptocurrency world. Despite CEO Jamie Dimon saying he wasn’t going to talk about cryptocurrencies anymore, there’s obviously a lot of talk going on behind closed doors. In the latest we’re-not-talking-about-cryptocurrency talk, JPMorgan let go a nugget that proves the lack of financial understanding among the brass.

Cryptocurrency enthusiasts are calling the multinational bank out for saying that one of digital currencies’ biggest features is what will cause its downfall. In other words, JPMorgan believes that cryptocurrencies won’t be able to handle liquidity if there’s another economic recession. Fiat currency, according to the company, can just be printed in abundance during a financial crisis. That’s a pretty remarkable statement coming from them, since printing additional currency only weakens its overall value.

In the past, central banks have traditionally injected more cash into a country’s economy during an economic crisis to compensate for decreases in lending and private sector spending. JPMorgan claims, erroneously, that a similar liquidity infusion will not be possible with cryptocurrencies since there is no central control over the network, and because the amount of coins released annually is a fixed amount.

Aaron Lasher, chief marketing officer of Breadwallet, was one of the first to counter JPMorgan’s narrow-minded claim.

“This is a classic case of creating the problem you offer to solve,” he said, “and exactly why Bitcoin exists. Why do we have the need for ‘emergency liquidity’ in the first place?”

Lasher went on to criticize JPMorgan by pointing out that fiat emergency liquidity exists solely because banks have no stimulus to properly manage the risk of liquidity. There is virtually no cost in printing additional currency at the central bank level, which provides a buffer for the banks. Because of this, banks feel more at ease handing out credit, which resulted in economic downturns like what was seen in the United States in 2008—the crisis that was precisely the reason why cryptocurrencies were brought to life.

Arthur Hayes, CEO of BitMEX, chimed in, stating that it was precisely that line of thinking that caused inflation in other financial assets. He also pointed out that if printing money were the cure to all ills, countries as Zimbabwe and Venezuela wouldn’t be in such dire shape economically. Printing additional money only has one result—to delay the inevitable. With cryptocurrencies, the plan is to not require a bailout.

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