J.P. Morgan – the very same J.P. Morgan whose CEO, Jamie Dimon, said Bitcoin is a “fraud” – has just launched JPM Coin, its very own digital currency.
In an announcement on its website, it said that “J.P. Morgan this month became the first U.S. bank to create and successfully test a digital coin representing a fiat currency”. The JPM Coin is based on its proprietary Quorum Blockchain technology, and is designed to enable the instantaneous transfer of payments between institutional accounts.
The project is currently described as a “prototype” so has had no special regulatory approval. However, Umar Farooq, the head of Digital Treasury Services and Blockchain explained that: “As we move towards production we will actively engage our regulators to explain its design and solicit their feedback and any necessary approvals.”
It’s key differentiators to the cryptocurrencies we know and love are:
- It is a permissioned blockchain, built by J.P. Morgan, so it will never be public
- Only J.P. Morgan’s institutional customers (e.g. banks, broker dealers, corporates) will be able to use it
- JPM Coin is backed by J.P. Morgan’s balance sheet, and is 1:1 redeemable in fiat – a JPM Coin “always has a value equivalent to one U.S. dollar”. i.e. there is no variation or speculation in the value of JPM Coin
- J.P. Morgan moves more than $6 trillion around the world every day for corporations, JPM Coin is designed as a tool to reduce the typical settlement time and associated costs
- J.P. Morgan describe cryptocurrencies as “investments” whereas JPM Coin is a “payment coin”
This was the plan all along…
In an attempt to reposition itself after Jamie Dimon’s past controversial comments, Farooq tries to convince us this is part of the master plan: “We have always believed in the potential of blockchain technology and we are supportive of cryptocurrencies as long as they are properly controlled and regulated.. Ultimately, we believe that JPM Coin can yield significant benefits for blockchain applications by reducing clients’ counterparty and settlement risk, decreasing capital requirements and enabling instant value transfer.”
In other words, it’ll save them money and give them an edge over their competitors.
Speaking to CNBC, Farooq described three early applications for the JPM Coin:
- International payments for large corporate clients. These currently rely on wire transfers and use decades-old networks like Swift which have cut-off times for transactions in different countries. JPM Coin will settle in real time, 24 hours a day.
- Securities transactions. Rather than relying on wires to buy an issuance — resulting in a time gap between settling the transaction and being paid for it — institutional investors can use JPM Coin for instant settlements.
- Treasury services. J.P. Morgan currently hold large amounts of dollars in subsidiaries across the world. These are used to move regulated money for multinationals – such as Honeywell International and Facebook – and used to handle employee payroll and supplier payments.
Farooq concludes: “Money sloshes back and forth all over the world in a large enterprise. Is there a way to ensure that a subsidiary can represent cash on the balance sheet without having to actually wire it to the unit?” Yes there is apparently – and the answer is JPM Coin.
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