Big US Banks' CEOs "Afraid" Of Bitcoin, Blockchain, Says Wealth Advisor

Josh O'Neill

21 September 2017

Chief executives of big US banks are likely “very afraid” of bitcoin, one wealth advisor has said.

Some financiers have steered clear of the controversial crypto-currency because of its volatility, but those at the helm of banks have another reason to dislike bitcoin, according to Rainer Preiss, executive director at Taurus Wealth Advisors.

“Of course, if you run a very large US bank, most probably you are afraid of blockchain and bitcoin,” he said.

His comments followed a slur on bitcoin made last week by JP Morgan CEO Jamie Dimon, who touted the first ever crypto-currency as a “fraud” and said he would fire any of his staff who traded it.

However Preiss argued that crypto-currencies could present investors with an opportunity because, in some ways, they are inherently transparent due to the blockchain technology underpinning them.

“The concerns are about the fractional reserve banking system, and the balance sheet of the Federal Reserve at $4.5 trillion, where the Fed officially refuses an audit,” he said. “On the other hand, on the bitcoin blockchain, you have an audit everyday because it's open-sourced.”

A blockchain is a virtual distributed ledger of transactions shared peer-to-peer that can record ownership across a public network of computers rendered tamper-proof by advanced cryptography.

The technology is causing a stir within the financial services sector as its supporters believe it could reduce hidden expenses in the financial system by ousting inefficiencies across areas such as payments, syndicated loans and equity clearing.

While banks have traditionally steered clear of bitcoin and other crypto-currencies, such as Ether and Ripple, they have invested millions in blockchain-related projects.

Still, crypto-currencies could also be a “systemic hedge” against the risk of asset price inflation, which central banks have potentially helped to create, Preiss said.

Bitcoin has volleyed from being practically valueless at its inception in 2009 to see prices as high as $5,000 for a single coin this year.

The crypto-currency's price hovered around $3,890 shortly after midday on September 21, according to CoinDesk. It had rebounded nearly $1,000 after plummeting last week following announcements by major bitcoin exchanges in China that they planned to close by the end of the month.