JPMorgan Unveils First U.S. Bank-Backed Digital Token, JPM Coin
JPMorgan has revealed plans to launch its own cryptocurrency, dubbed JPM Coin, to transform its wholesale payments business, through CNBC.
The JPM Coin, which will be issued to customers when depositing money at the bank, will initially be rolled out to a small number of customers in a few months and will allow near instant payment settlement over the bank’s blockchain network. The banking giant said that the use of JPM Coins reduce customer settlement and counterparty risk, as well as lower capital requirements.
While in 2017, the CEO of the bank, Jamie Dimon called cryptos a fraud, he has since said that blockchain, the technology behind cryptos, and regulated cryptocurrencies hold promise.
JPM Coin differs from other conventional cryptocurrencies in two main ways:
- JPMorgan’s digital coin is pegged to the dollar. After transactions, such as payments, are completed, holders of the digital coins can exchange them for dollars from JPMorgan at a ratio of 1: 1. JPM Coins are effectively what is called a “stablecoin” and are not subject to the significant price volatility that other cryptos, such as Bitcoin, are impacted by.
- The new currency will only be available to wholesale customers. Unlike conventional cryptos, where no entity controls the rights to buy or hold them, JPM Coins will be centrally controlled by JPMorgan. Only customers who have successfully passed anti-money laundering tests and approved by the regulator will be able to use the bank’s blockchain network.
The banking giant’s digital currency could also be used for other applications besides payment settlement:
- JPM Coin could be used for securities transactions. Last year, the bank used its blockchain platform, Quorum, to test a debt issuance app, mirroring the execution of an actual transaction for the National Bank of Canada and other large corporations. Going forward, institutional investors could use the digital coins for instant settlement of similar securities trades executed on the quorum of JPMorgan.
- This could enable its wholesale customers to earn more of their money through money consolidation. JPMorgan blockchain project manager Umar Farooq said subsidiaries of large companies might be able to represent cash on their balance sheets without having to receive real money from their parent company; JPM Coin transfers could be used instead.
There is significant adoption potential for JPMorgan’s token money, given the size of its wholesale business, and deployments like this point to increasing bank engagement with blockchain going forward. The banking giant moves more than $ 6 trillion around the world a day for business, while its wholesale customers include 80% of all Fortune 500 companies, giving JPM Coin a solid chance to see widespread adoption.
Other financial institutions (FIs) have also tested a variety of blockchain applications: The Utility Settlement Coin (USC) project, with members like UBS, BNY Mellon, Deutsche Bank and Santander, aims to develop a form of asset-backed digital money for use in clearing and settling transactions on a platform. blockchain form, for example; this hoped to go live at the end of 2018, but has not yet done so.
As more blockchain apps come online – HSBC installed $ 250 billion in forex trading in 2018 using technology, for example – and demonstrating a variety of successful use cases, we expect to see more FIs rolling out similar projects.