JPMorgan Reportedly Plans To Lend Against Bitcoin, Ethereum As Wall Street Warms Up To Crypto

JPMorgan Chase (JPM) is exploring lending against clients’ cryptocurrency holdings, according to a report by The Financial Times, amid growing interest among traditional banks to venture into digital assets.

According to the report, citing people familiar with the matter, JPMorgan is exploring lending directly against crypto assets, such as Bitcoin and Ethereum, starting next year. However, the plans could change, the report added.

This would mark a significant turnaround for JPMorgan Chief Executive Jamie Dimon, who had called Bitcoin a ‘fraud’ in 2017 and had also warned about firing any trader for any bitcoin transactions previously.

However, the fortunes of the cryptocurrency industry have changed after Donald Trump returned to the White House as President in January. Last week, the U.S. House of Representatives passed a bill to regulate stablecoins, marking a landmark piece of legislation for the industry.

U.S. banks have also jumped in with the Bank of America and Citigroup developing stablecoins of their own. Dimon also said last week that America’s largest bank will be open to stablecoins, which are pegged to the value of the U.S. dollar.

The veteran has also softened his stance on Bitcoin, the largest cryptocurrency by market capitalization. “I don’t think you should smoke, but I defend your right to smoke. I defend your right to buy bitcoin,” he had said in May.

Retail sentiment on Stocktwits about Bitcoin, which recently soared past $122,00, was in the ‘neutral’ territory at the time of writing.

Last month, JPMorgan allowed clients to use cryptocurrency-linked ETFs as collateral for loans. However, most U.S. banks do not directly accept digital coins as collateral, nor do they keep cryptocurrency in their balance sheets. 

JPMorgan will likely face the technical challenge of managing cryptocurrency seized from customers who default on their loans backed by digital coins. The report added that the bank will likely work with a third party that would take custody of the crypto assets on behalf of JPMorgan.

JPMorgan stock has gained nearly 21% this year.

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