FT Cryptofinance: JPMorgan turns to ex-Celsius exec for crypto advice

Welcome to this week’s edition of the FT’s Cryptofinance newsletter. Today, we’re taking a look at JPMorgan hiring a former Celsius lobbyist.

The revolving door in Washington between government and private sector, and adversaries, is a fact of life but every so often, one move comes along that causes an intake of breath.

This week JPMorgan Chase hired Aaron Iovine, a former executive from crypto lending platform Celsius Network, as its new executive director for digital assets regulatory policy.

Yes, the US’s largest bank by market capitalisation was hiring the chief lobbyist from a company that froze customer assets and filed for bankruptcy protection in the summer. It is currently fighting creditor claims in court and may yet have questions from regulators as to who knew what and when, before customers were locked out.

To be clear, there’s no evidence to suggest Iovine was involved in crucial decisions at Celsius, or even the day-to-day running of the company. A lobbyist is not a C-suite position.

Iovine did not respond to a request for comment, but his LinkedIn profile tells us through his career he has focused on “developing policies that foster responsible innovation while emphasising consumer protection and regulatory oversight”.

Even so, it’s quite a look for JPMorgan to hire someone from one the most controversial stories in the crypto industry this year. Crypto is still an upstart, garnering plenty of investor interest but its adoption remains very limited. JPMorgan is financial services royalty.

“If you’re a congressperson and you’re on the fence about crypto, and the person sitting across from you was affiliated with a company that is at least in the top five spectacular flame-outs of the crypto industry to date, that has to take away what you’re hearing from that person,” a former regulator familiar with the inner workings of the Capitol told me. JPMorgan declined to comment on Iovine’s hire.

Moreover an average politician could be forgiven if they felt mixed messages were emanating from JPMorgan. Jamie Dimon, the bank’s chief executive, has long made his feelings known on crypto.

Only last month in his congressional testimony Dimon said: “I’m a major sceptic on crypto tokens, which you call currency like bitcoin. They are decentralised Ponzi schemes, and the notion that it’s good for anybody is unbelievable,” before linking them with ransomware, money laundering, sex trafficking, and stealing, for good measure.

But perhaps JPMorgan and the crypto world have more in common than first appears. In many ways Dimon is a more charismatic, traditional finance version of the crypto chiefs who readily offer their views on a range of issues while their organisation appears to do something quite different. If anyone points it out, they seem to channel the spirit of poet Walt Whitman — Do I contradict myself? Very well then I contradict myself (I am large, I contain multitudes).

When it comes to regulation and Washington, both sides seem to want the same thing: clarity. For crypto firms it is usually legal precision as to what counts as a security. For banks, that definition matters too but only in conjunction with finalisation of the Basel rules on capital requirements for holding crypto assets.

Absent those rules, banks can’t hold crypto on their balance sheet, which is usually a prelude to trading it on behalf of a customer. But that doesn’t mean they can’t offer anything else the customer wants, from advice to payments to research. Dimon didn’t get where he was by putting personal views ahead of where customers’ interests lay.

Celsius was, if nothing else, a very consumer-focused business. The hiring underlines that the debate over the future regulation of crypto has gone up a notch in the wake of this year’s crypto credit crisis. There are plenty of lessons to learn about consumer advertising and ringfencing of assets, for example.

In which case, one can see why JPMorgan might hire people with the most relevant experience. After all, everyone in Washington wants the level playing field tipped in their favour.

What’s your view on JPMorgan and Celsius? Email me your thoughts at scott.chipolina@ft.com.

Weekly highlights

• Buried in a European Commission paper on “digitising the energy system” is a line that may have consequences for proof-of-work blockchains. After the successful Merge last month the EU said: “This switch shows that the crypto world can move towards a more efficient system. But we need to go the extra mile for this to happen.” That strikes me as an early warning shot across the bitcoin bow — some in the EU may not give up on banning proof-of-work blockchains. “As long as you continue supporting these markets, you’re still enabling their massive carbon footprint,” Digiconomist founder Alex de Vries told me.

• BNY Mellon, one of the world’s largest custodian banks, is “now live” with its service to hold digital assets on behalf of customers, president and chief executive Robin Vince said on an earnings call. For now, it’s available only in the US. Vince went on to add the bank “did not invest in this space just for the purpose of custodying crypto. We see this as the beginning of a much broader journey.”

• Payments giant Mastercard this Monday announced Crypto Source, a program designed as a bridge that will let banks offer crypto trading capabilities to their customers. The announcement, which builds on the company’s partnership with Paxos, is still being prepped for pilot programs but it made waves across the industry. ETC Group founder and co-chief executive Bradley Duke described the BNY and Mastercard moves as a “big vote of confidence in the future of crypto”.

Soundbite of the week: Liz Truss on crypto

OK, this tweet is from January 2018, but it’s been a week of political upheaval in the UK (to say the least) and I’d be remiss to not reflect that somewhere in this week’s newsletter.

Lettuce not forget when the now shortest-serving prime minister in British history chimed in on what the UK should do on the crypto front.

“We should welcome #cryptocurrencies in a way that doesn’t constrain their potential. Liberate free enterprise areas by removing regulations that restrict prosperity. #PolicyExchange #futureoffreedom #shake-up.”

I think we’ve had enough shake-up for one week, thanks.

Data mining

Exchanges are bound up with the development of crypto, even if the most committed believe that crypto means decentralisation — an attempt to build a financial system that does away with a trusted central intermediary.

Data from CryptoCompare suggest that, since 2019, a total of 68 crypto exchanges have been shut down across the globe.

The chart below provides a snapshot showing us which jurisdictions are leading the way when it comes to crypto exchanges closing down. The UK shares top spot with Hong Kong, undermining the idea London will really morph into the crypto hub some hope it will become.

That’s it for this week. Have a good weekend.