Remember when big banks looked ripe for disruption? Back in 2019, people—including me—thought upstart neo-banks like Chime and SoFi were going to eat their lunch. These challengers had a slick, digital-first business model and, unburdened by legacy costs like branches and tellers, were poised to undercut the slow-footed incumbents in everything from loans to investment services. It didn't work out that way.
A widely shared Wall Street Journal piece this weekend, titled "America's biggest bank is everywhere—and it isn't done growing," reveals how JPMorgan emerged from the pandemic and the recent regional bank crisis richer and more influential than before. Meanwhile, JPMorgan's big bank rivals—Citi, Bank of America, and the gang—are also flourishing while their would-be disrupters struggle to stay alive. As the Journal notes, this has come about in part because the industry giants have an implicit backstop from the U.S. government, which "encourages people and businesses to move their money to them in times of stress creating a feedback loop that makes big banks bigger."
All of this coincides with a broader trend of banks, which serve as lenders of last resort to kings and heads to state, becoming captured by governments who want to control them for political ends. This is probably a bad thing. As a headline from The Economist noted this month, "The financial system is slipping into state control," with the publication fretting that meddling by the banks' political masters could sow seeds of another policy disaster along the lines of the 2008 mortgage crisis.
Part of this control comes in the form of governments dictating what type of assets pass muster when it comes to the collateral banks must hold: "Banks would be able to use deposit financing only to hold assets that carried a government stamp of approval," observes The Economist.
This brings us to Bitcoin. Needless to say, the decentralized digital currency does not carry the government's stamp of approval. Even though Bitcoin has proved a more resilient store of value than many conventional investments, the U.S. government not only refuses to recognize it as a viable asset but is discouraging banks from serving companies that touch crypto.
The Bitcoin crowd could care less of course. Satoshi Nakamoto, the currency's creator, launched Bitcoin as an explicit rejection of government-controlled money, and many of its most devoted supporters share this distrust of the state. The question now is whether more everyday people will start viewing Bitcoin as a viable alternative to a banking system that is being subjected to mounting political pressure.
It would be ironic indeed if the U.S. government's recent push to exert more control over the banking system delivered a boost to an alternate form of money it wants to stamp out. But as history has shown, using regulation for political ends can produce unintended consequences—and so it would be no surprise to discover that as big banks grow bigger, Bitcoin does too.
Jeff John Roberts
jeff.roberts@fortune.com
@jeffjohnroberts
