JPMorgan Chase, led by CEO Jamie Dimon, is going all-in on the cryptocurrency space. They are now even accepting Bitcoin ETFs as collateral for their loans. This decision represents a significant pivot for the financial behemoth, especially in light of Dimon’s previous condemnations of crypto. Dimon has been vocal about his skepticism regarding Bitcoin, calling it a pet rock and a Ponzi scheme. He works to defend his clients’ right to invest in this asset class.

Put Dimon’s personal dislike aside for a minute, because JPMorgan is welcoming crypto ETFs with open arms, a strong sign of acceptance of digital assets within traditional finance. The firm is actively building JPMD, a platform designed to trade cryptocurrency, further solidifying its commitment to the space.

The introduction of the acceptance of Bitcoin ETFs being used as collateral adds a new aspect for risk management. According to Wilfred Daye, Head of Digital Assets at Enclave, a conservative approach would be to over-collateralize with expected loan-to-value ratios (LTV) of 50-90%. We look forward to reading more of his whizzy ideas to make collateral values reportable in real time and collateral segregation (not Jamie’s kind) to reduce dangers from hacks and rehypothecation. Adding crypto to net worth calculations will improve clients’ borrowing potential. Daye wants to see this included in the calculation.

Marcin Kazmierczak, COO & co-founder of RedStone, agrees with the assessment that JPMorgan’s move was a game-changer. He further thinks it indicates a “fundamental shift” in how the financial industry assesses risk.

"We're seeing convergence between TradFi risk models and crypto's volatility profile through structured products like ETFs" - Marcin Kazmierczak

Kazmierczak thinks crypto is maturing. From a speculative asset to a legitimate asset class. Our industry is maturing as it becomes more intertwined with traditional finance.

Spot Bitcoin ETFs have just undergone historic growth. Ever since their launch in the U.S. in January 2024, these funds now manage an astounding $128 billion. This boom in popularity is surely part of what has led JPMorgan to start considering these ETFs in its lending decisions.

The movement toward tokenization isn’t stopping there, even beyond Bitcoin ETFs. BlackRock’s BUIDL and Apollo’s ACRED are two recent, illustrative examples, highlighting the accelerated adoption of asset tokenization making its way into traditional finance.

Yet, as Daye warns, if there are regulatory differences among jurisdictions, this may create the opportunity for regulatory arbitrage. Jurisdictions with laxer Basel III capital requirements will lure more crypto activity. This could create new behind-the-scenes or even centrally managed uneven playing fields and exacerbate systemic risk. Europe has been caught in the crypto regulation slow lane, believes a Franklin Templeton exec.