The Fintech Files: JPMorgan’s blockchain boss on why ‘most of crypto is still junk’
Back in February, Umar Farooq, the head of JPMorgan’s blockchain arm Onyx, told Financial News that crypto was still in its “Napster age” – in other words, it has a long road ahead to maturity.
Since then, the industry has been humbled by an era-defining market crash, hollowing out a once-bloated sector. So does Farooq think it has made much progress?
Apparently not. In a panel discussion with the Monetary Authority of Singapore on 29 August, the Onyx boss said financial institutions are still being held back on getting into crypto because of a lack of regulation.
“The use cases haven’t arisen fully, and the regulation hasn’t caught up,” he said. “That’s why you see the financial industry, in general, being a little bit slow in catching up.”
Yet many TradFi giants are gearing up for regulators to get their act together. BlackRock recently partnered with Coinbase to offer crypto trading services to its institutional clients, while Abrdn and Fidelity have also made moves into the space.
Farooq added: “Most of crypto is still junk, actually. With the exception of, I would say, a few dozen tokens, everything else that has been mentioned is either noise or is just going to go away.”
Moreover, the JPMorgan exec said crypto has not reached a stage where it can be used at scale for “serious transactions” between financial institutions.
Instead, Farooq said it is still primarily a vehicle for speculative investing. Cryptos need to “mature so that you can actually do things with them”, he said.
“Right now, we’re just not there yet.” Watch the full panel discussion here.
His comments echo those of the Morningstar chief executive, Kunal Kapoor, who recently told FN that cryptocurrencies “have not proven their case for the masses”.
In an interview on 25 August, he said: “I personally find the lack of stability and predictability to be a concern.”
“The limited usage and backing says something to me, that the price of cryptos spikes when there is a war on and people are trying to get their money out of the country.”
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Lessons from the crypto winter
BlockFi was, for a while, one of the most talked-about participants in the recent crypto crash.
The buzz reached fever pitch a day after fellow lender Celsius closed all withdrawals, when Zac Prince’s company let a fifth of his employees go.
Many in the market wondered: would BlockFi be the next domino to fall?
In the end it survived – with the help of a $250m loan from FTX boss Sam Bankman-Fried.
Now, Prince has penned a commentary piece about what he has learned from the episode.
First, he writes, “disciplined risk management” must be embedded into the culture of a company.
Second, companies must be financially transparent.
“It can be painful to pass up opportunities for growth,” Prince adds. “But unsustainable growth at any cost is, as we’ve seen, a recipe for collapse.”
And third, companies must comply with regulators, whose support can be achieved “only through active dialogue, compliance, and partnership”.
Those things sound sensible – though traditional finance bosses may very well read these and wonder: if these are new policies, what on earth was BlockFi doing before?
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On the same day as JPMorgan’s Farooq’s comments, the Monetary Authority of Singapore’s managing director Ravi Menon said he will take further steps to restrict retail investors’ access to crypto. The Financial Times reports that he will introduce “further measures to reduce consumer harm”.
Meanwhile, luxury brands such as Gucci and Tiffany have defied the crypto crash to dive headlong into non-fungible token projects. Bloomberg asks why these brands are so bullish on NFTs.
And finally, sex work and crypto have been closely linked for years — but that could be changing. Coindesk has a long read on why the two may be falling out of bed with one another.
The last word
“Crypto bro” culture is a problem, says Sendi Young, the European boss of blockchain payments giant Ripple.
Speaking to FN in a recent interview, Young, one of the most powerful women in an extremely male-dominated industry, warned:
“With crypto being at this intersection of financial services and technology, which are both typically white-male-dominated industries, there is a real threat that we could repeat the same mistakes as in those industries.”
To contact the author of this story with feedback or news, email Alex Daniel
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