JPMorgan Chase Says Bitcoin's Main Risk Isn't Strategy
JPMorgan Chase Says Bitcoin's Main Risk Isn't Strategy.
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Strategy's (NASDAQ: $MSTR) recent Bitcoin (CRYPTO: $BTC) sales are not the main risk facing the cryptocurrency or the market for digital assets, says JPMorgan Chase (NYSE: $JPM).
Analysts at the largest U.S. bank say that the bigger threat to the cryptocurrency market comes from adoption that does not benefit public blockchains and their tokens.
Nikolaos Panigirtzoglou, the lead crypto analyst at JPMorgan, said in a new report that the crypto ecosystem could see slower activity, lower liquidity, and weaker capital flows as tokenization, payments, and settlement increasingly happen outside public crypto networks.
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"We do not see Strategy as the main structural threat to Bitcoin," wrote the analyst. "In our view, the more important risk to Bitcoin stems from the broader crypto ecosystem and from blockchain adoption within traditional finance continuing to develop in ways that bypass public permissionless networks."
Panigirtzoglou adds that permissioned blockchains are preferred because they offer greater privacy, anti-money laundering controls, and governance.
JPMorgan Chase also notes that the Bank for International Settlements has warned against using public permissionless blockchains for systemically important financial infrastructure.
Risks posed by permissionless blockchains relate to scalability, governance, legal accountability and settlement finality.
Banks are building their own blockchain infrastructure for tokenized deposits. Tokenized deposits are digital representations of bank deposits.
Should tokenized deposits become widely adopted, they could reduce the need for stablecoins in institutional payments and settlement, says Panigirtzoglou.
The analyst also writes in his report that real-world asset tokenization may increasingly remain within traditional financial infrastructure rather than moving onto public blockchains.
There has been concern among investors as Strategy, the largest corporate owner of Bitcoin, begins to sell its holdings of the cryptocurrency.
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