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Bitcoin Breakdown: JPMorgan’s Dimon Predicts Bitcoin’s End

  • By Andrew Deichler
  • Published: 2014-01-24

Though Bank of America Merrill Lynch and Wells Fargo have expressed positive attitudes about Bitcoin, don’t expect JPMorgan Chase to follow suit. Jamie Dimon, chief executive of the largest bank in the United States, denounced the virtual currency this week, and even predicted its demise.

“It’s a terrible store of value,” Dimon told CNBC. “It could be replicated over and over. It doesn’t have the standing of a government.”

Dimon cited criminal activity involving Bitcoin as a key reason why his bank is likely to eschew the cryptocurrency. “A lot of it is being used for illicit purposes,” Dimon said. “And the people who will get upset with it are governments. Governments put a huge amount of pressure on banks: know who your client is, did you do real reviews of that? Obviously it’s almost impossible to do with something like that.”

Treasury Secretary Jack Lew also expressed to CNBC that he is concerned about Bitcoin being used for illegal activity. Nonetheless, he is taking a wait-and-see approach. “Bitcoin is a phenomenon that we need more time to discuss,” Lew said. “From the government’s perspective, we have to make sure it does not become an avenue to funding illegal activity or to funding activities that have malign purposes like terrorist activities. You know, it is an anonymous form of transaction, and it offers places for people to hide.”

Dimon, however, believes it is only a matter of time before the government intervenes and imposes a series of restrictions, causing Bitcoin’s appeal to wane dramatically. “They will eventually be made as a payment system to follow the same standards as the other payment systems and that will probably be the end of them,” he said.

It should be noted, however, that JPMorgan has patented a digital payment system similar to Bitcoin, which features the ability to make anonymous payments. One analyst even referred to it a “Bitcoin killer.”

Bitcoin to Get the ‘Art’ Treatment in Sweden

While regulators around the globe are still scratching their heads over how to regulate Bitcoin, count Sweden among those unlikely to recognize it as a true currency. Instead, the largest Scandinavian economy is expected to reject Bitcoin and other virtual currencies and instead give them the same tax treatment it would give a piece of art.

Olof Wallin, an official at the Swedish Tax Agency, said in an interview with Bloomberg that true currencies are traditionally tied to a central bank or geographic area. His agency, which is drafting rules for virtual currencies and the programmers who generate them, “view Bitcoins as what we call another asset—just like art or antiques,” he said.

Interpreting Bitcoin in this way would allow Sweden to charge capital gains taxes on any transactions. It would fall under the same asset class as art, antiques, jewelry and stamps.

Wallin added that Sweden is also considering taxing Bitcoin miners as businesses.

Other Nordic countries are also trying to determine how to regulate Bitcoin; Norway has labeled it a taxable asset, Finland plans to treat it as a commodity and Denmark is drafting a proposal that aims to protect consumers and businesses from losses.

Major U.S. Electronics Retailer TigerDirect to Accept Bitcoin

TigerDirect.com announced Thursday that it has begun accepting Bitcoin as a method of payment on more than 200,000 products.

TigerDirect said it is the first major U.S. electronics retailer to date to accept the digital currency. TigerDirect spent several months reviewing the options for processing Bitcoin, ultimately settling on BitPay to provide the means of conducting Bitcoin payments on its website.

TigerDirect will not only accept the digital currency as payment, but will also sell the computer components used to mine it. The retailer has partnered with AMD to produce a large assortment of mining graphic cards from Sapphire, MSI, VisionTek, Diamond and XFX.

“With individuals building their own high-powered PCs with parts offered on our site to mine Bitcoins, it’s a logical fit,” said Steven Leeds, director of corporate marketing for TigerDirect.

Customers will be able to utilize Bitcoin as payment on both desktop and mobile websites. Bitcoin will not be accepted for payment at any TigerDirect physical retail locations, however.

Copyright © 2014 Association for Financial Professionals, Inc.
All rights reserved.

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