JPMorgan to offer loans with crypto ETFs as collateral: What this means for digital assets

It is increasingly becoming evident that as regulatory barriers slowly come off of decentralized digital assets, following the directives of Donald J. Trump, the 47th and active President of the United States of America, the cryptocurrency ecosystem is becoming vastly embraced by traditional institutions, where various digital asset solutions are being actively discussed and integrated into business structures and operations.

This growth and acceptance is expected to grow exponentially in coming years due to growing launches of crypto-centric products and services, where the masses are being exposed to valuable crypto use cases in a bid to capitalize on the global acceptance of the technology as the next phase in the evolution of money and essentially the system for future economic activities.

From exploring stablecoins, to setting up strategic reserves with decentralized digital assets like Bitcoin and specific altcoins, institutions are increasingly betting big on crypto. In a recent report, JPMorgan, which is generally popular for being anti-crypto thanks to its functioning CEO, Jamie Dimon, is cited to be in the process of offering trading and wealth-management clients the option of using crypto-linked assets as collateral for loans.

Although JPMorgan, the largest bank in the United States by assets has had certain crypto initiatives over the years, it's CEO has often been cited by media platforms for being highly skeptical and disapproving of the adoption of decentralized digital assets such as Bitcoin, recently likening it to the habit of smoking saying:

“I don’t think you should smoke, but I defend your right to smoke. I defend your right to buy Bitcoin.”

That said, given the evident inevitability that Bitcoin and generally cryptocurrencies and associated assets will become major aspects of future economies, not only facilitating value transfer as an alternative to traditional fiat, but actively restructuring and shaping how future economies are designed, managed or governed and scaled, it's become a case of embracing what the future of money looks like or getting left behind.

The race to securing a competitive edge has begun and JPMorgan, despite its history, is making strategic moves.

JPMorgan Chase & Co. plans to let trading and wealth-management clients use some cryptocurrency-linked assets as collateral for loans, a major step by the biggest US bank to make inroads into an industry President Donald Trump has pledged to support.

The firm will start providing financing against crypto exchange-traded funds, beginning with BlackRock Inc.’s iShares Bitcoin Trust, in the coming weeks, people familiar with the matter said. The move marks the latest effort involving crypto among the biggest US banks after the Trump administration started removing regulatory barriers.

The big question, as always, is “how does this benefit decentralized digital assets (crypto)?”

The next paragraph of the Bloomberg report touches on a very important element to developments such as this.

In some cases, JPMorgan will also begin taking wealth-management clients’ crypto holdings into account when assessing their overall net worth and liquid assets, the people said, asking not to be named as the plans aren’t public. That means cryptocurrencies will be given similar treatment to stocks, cars or art when calculating how much a client can borrow against their assets.

What exactly does this mean?

It means, in simple terms, that cryptocurrencies are becoming legitimate assets in the eyes of traditional institutions in real time.

This completely changes how these companies view and approach our ecosystem, essentially allowing for a more smooth inter-ecosystem/industry value transfer.

When cryptocurrencies increasingly become legitimate asset classes, they step into a position of being embraced by traditional investors due to being accepted assets for fresh liquidity creation.

This is something we've loosely discussed in the case of growing Bitcoin treasury companies. The idea of acquiring debt to buy Bitcoin effectively legitimizes bitcoin, allowing institutions and individuals to continually borrow against said assets already bought with debt to increase exposure and potential ROI.

The traditional finance industry is at a crucial point where it either accelerates the adoption of cryptocurrencies and earns a fair share of value in the process or gets left behind.

Posted Using INLEO