Is JP Morgan’s JPM Coin a Cryptocurrency or Just an Internal Payments System?

On February 15th 2019, Jamie Dimon, announced that JPMorgan is launching a cryptocurrency of its own—the JPM coin, the digital token created by engineers at JP Morgan to instantly settle payments.
JP Morgan

What would JP Morgan Chase say about the JPM Coin? Shutterstock Images

The 15th of February 2019 has now become a milestone in the digital and cryptocurrency world. That’s because the announcement of the JP Morgan Stable Coin stands to revolutionize instant international payments and theoretically, start the race to replace cash currency. It has promised a lot of things – could this be the advent of the blockchain revolution?

For some, J.P. Morgan’s new currency may come as a surprising development for a technology that rose out of the 2008 financial crisis. Not to mention that back in 2017, Jamie Dimon, the bank’s CEO called[1] cryptos a fraud.

Mr. Dixon has since said that blockchain, cryptos’ underlying technology, and regulated cryptocurrencies hold promise.

Well, let’s see if the future can fulfill its own promises, while giving some serious competition to Ripple[2], which this week, holds the fourth biggest market cap in this crypto space has been exclusively giving the service of transfer of payments from one nation to other at a quick rate.

About the JPM Coin:

The JPM Coin, albei still a prototype and continually tested, is a cryptocurrency but works completely differently from bitcoin.

Whereas Bitcoin can be purchased by consumers, is available for public investment and is on a public blockchain, the JPM Coin is only allowed to be used by pre-approved, select (large) corporate customers and of course, JP Morgan’s existing clients. Only institutional customers can participate. The JPM Morgan Coin is not decentralized — it is a stable digital coin for replacing dollars and for fast payments.

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JP Morgan doesn’t want to run afoul of any regulation or money laundering. Anyone using the JP Morgan Stable coin will need to be verified and complete the Anti Money Laundering (AML) and Know Your Customer (KYC)[3]. This would reduce the chances the fraud and scams in any kind of related transaction using JP Morgan Stable coin.However, executives[4] aren’t ruling out that it could eventually be used for retail customers.

The JPM Coin is a stable coin, fixed or, redeemable for a single U.S. dollar, backed by JP Morgan, to ensure no price volatility, similar in concept to stablecoins.

It operates on JP Morgan’s own coin ledger, and can’t be moved off that ledger. It works on a private and permission blockchain technology known as Quorum which was developed[5] by the JP Morgan itself with the help of Ethereum Enterprise Alliance.

Benefits of the JPM Coin:

Corporate Clients

JPM Coin benefits: International payments for large corporate clients, secure transactions and bank’s treasury services. Coingape Images

Well, first and foremost, its speed — incredible speed in processing payments among customers. Umar Farood, JPMorgan’s head of blockchain technology, said[6] that now transfers will happen almost instantly. Farooq explains[7]. “Exchanging value, such as money, between different parties over a blockchain requires a digital currency, so we created the JPM Coin.”

So, if you’re a large company with big investments in JP Morgan and get qualified, and want to pay another JP Morgan client, you can use your US dollars to receive JPM coins for a payment or security purchase on the blockchain instantly and seamlessly. Farooq adds. “As we move towards production we will actively engage our regulators to explain its design and solicit their feedback and any necessary approvals.”

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JPMorgan transacts approximately $6 trillion per day across international borders for corporations, while its clients include 80% of all Fortune 500’s, which gives the JPM Coin a solid chance to see widespread adoption.

Other financial institutions have tested a variety of blockchain applications: The Utility Settlement Coin (USC) project[8], whose members include BNY Mellon, UBS, and Deutsche Bank, is developing a type of asset-backed digital cash that can be used in settling transactions on a blockchain platform. It hoped[9] to go live at the end of 2018, but has yet to do so.

As more blockchain applications go live and demonstrate a variety of successful use cases, we expect to see more Financial Institutions rolling out similar projects.

Swift transaction network is most likely the primary target of JPM Coin. Indeed if blockchain technology is faster, cheaper and more reliable than the Swift environment, who can blame JP Morgan from wanting to be the first mover?

Stay tuned!

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The writer’s views are expressed as a personal opinion and are for information purposes only. It is not intended to be investment advice. Seek a duly licensed professional for investment advice.

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