JPMorgan Chase is launching its own cryptocurrency for the first time for American banking.
The article was updated in February. 20 to include a new comment.
In February. 14, US banking giant JPMorgan Chase announced its own cryptocurrency. Significantly, it is the first time a major U.S. Bank has leveraged digital assets for direct use in business operations.
It’s fair to say that the move comes unexpectedly for JPMorgan Chase, whose CEO, Jamie Dimon, is famous within the crypto community for his anti-Bitcoin (BTC) comments. Here are the main takes of reports and comments on the new virtual currency, dubbed ” JPM Coin.”
JPM Coin aims to increase the efficiency of the settlement, initially within three of its operations
There are three early applications for JPM Coin, as Umar Farooq, head of the lender’s blockchain projects, told CNBC.
The first is cross-border payments for large corporate customers, which are currently dependent on bank transfers provided by networks such as SWIFT, meaning they can take up to several business days to settle. According to Farooq, payments with JPM Coin will be made instantly at any time of the day.
As a result, SWIFT, which currently handles more than half of all high-value cross-border payments, could also be challenged to upgrade its remittance system. The 46-year-old Belgium-based interbank messaging service has already been confronted by Ripple (XRP), whose CEO, Brad Garlinghouse, had recently stated that “what we are doing day to day is, in fact, taking over SWIFT.Ripple has reported several advances in the field of international payments, allegedly saving transaction costs by 40-70 percent with its xRapid platform and adding several major banking institutions to its RippleNet network.
SWIFT, in turn, has already begun researching blockchain as one of the options for achieving faster payments. In addition, it has been pushing its Global Payments Innovation (GPI) payment platform: recently, the banking network launched a proof of concept (PoC) of a gateway that would allow blockchain software firm R3 to connect to the GPI.
Secondly, JPM Coin will be used for securities transactions. In April, the bank tested its Quorum Blockchain platform, along with the National Bank of Canada and other participants in the lending sector. The intention was to streamline origination, settlement and interest rate payments, among other financial processes.
Specifically, as Reuters wrote ,the trial ” reflected the Canadian bank’s oferta 150 million offer on the same day of a one-year floating rate Yankee certificate of deposit.Thus, institutional investors can use JPM Coin for instant settlements, rather than waiting for a bank transfer to arrive.
JPMorgan Chase created Quorum in 2016 as part of the Ethereum Enterprise Alliance (EEA), of which it is one of the founding partners. The platforms run on the Ethereum (ETH) blockchain and are modeled after the Ethereum Go client. It is currently used by pharmaceutical companies Pfizer and Genentech, as well as Microsoft Azure, among others. In March, JPMorgan Chase stated that they were considering making Quorum an independent entity as a way to attract more partners who might be scared off if they are competitors to the bank.
Finally, the new cryptocurrency could be employed by large corporations such as Honeywell International and Facebook, which will reportedly use JPMorgan Chase’s treasury services business to replace the funds they own in various subsidiaries around the world. According to CNBC, the companies brought the lender 9 9 billion in revenue in 2018. Farooq explained in a comment:
“Money slides back and forth around the world in one big company. Is there a way to ensure that a subsidiary can represent cash on the balance sheet without actually having to connect it to the unit? That way, they can consolidate their money and probably get better rates for it.”
Testing for the token is set to begin ” in a few months.However, only a small amount of the total funds involved in the above three areas would involve JPM Coin at first. In total, JPMorgan Chase moves more than 6 6 billion worldwide daily, according to CNBC. It is the largest bank in the country. As Farooq said:
“Almost all large corporations are our customers, and most of the world’s major banks are as well. Even if this is limited to JPM clients at the institutional level, it should not stop us.”
He also added that, in the future, the lender’s token could be used for payments on internet-connected devices if they migrate to blockchain. In general, the representative of JPM seemed enthusiastic about the prospects of technology at the bank.
“So anything that currently exists in the world, as you move to the blockchain, this would be the payment tranche for that transaction.Applications are frankly quite endless; anything where you have a distributed ledger involving corporations or institutions can use this.”
JPM Coin resembles a stablecoin, which is in line with a general trend
According to CNBC’s report, JPM Coins are pegged to U.S. dollars to keep their value stable, technically, that makes the new token a stablecoin, at least in its initial form.
Customers will reportedly be issued the coins after depositing dollars at JPMorgan Chase. After the tokens are used for a security payment or purchase on the blockchain, the lender will allegedly destroy them and give customers an equivalent amount of fiat in return.
Overall, stablecoins had a great year in 2018, becoming a growing trend among the market’s most compliance-oriented players. For example, Goldman Sachs-backed startup Circle launched its USD Coin (USDC) in collaboration with major US crypto exchange Coinbase, and the Winklevoss twins unveiled their own stablecoin called the Gemini dollar after receiving the regulatory green light from The New York Department of Financial Services (NYDFS).
JPM Coin will run on Quorum, the bank’s private ETH blockchain
According to a Frequently Asked Question posted by JPM on the same day CNBC broke the news, its token will initially be powered by the aforementioned blockchain Quorum (which is authorized, or, in other words, private), but will also be applicable to “all standard blockchain networks” in the future.
“The JPM Coin will be issued on Blockchain Quorum and subsequently spread to other platforms. JPM Coin will be operable on all standard Blockchain networks, ” the guide says.
Based on that, Jerry Brito, executive director of Coin Center, a nonprofit research and advocacy center focused on cryptocurrencies and blockchain, told MarketWatch that JPM simply launched an internal payment system instead of an actual cryptocurrency:
“There is a lot of confusion. […] I see people referring to it as a cryptocurrency. It is not a cryptocurrency. A cryptocurrency is one that is open and without permission. If you want to download it, you don’t need permission, you just need some software.”
In addition, JPM Coin will eventually expand its role beyond being a stable currency, according to the FAQ:
“Over time, JPM Coin will spread to other major currencies. Product capabilities and technology are currency independent.”
For now, the token is designed to be used only by JPM’s institutional clients.
Michael Dowling, CEO and founder of FairX, a financial services company involved in banking and cryptocurrencies, and former Chief Technology Officer of IBM’s blockchain division, told Cointelegraph that JPM Coin “is no different / better than any other stablecoin issued by a fintech rather than a bank.”
Dowling argues that JPMorgan Chase’s new digital asset has not been approved as a value transfer instrument by the Office of the Comptroller of the currency (OCC), the bank’s main regulator. In addition, he emphasizes that it can only be used within the “small walled garden” of JPMorgan Chase, and has allegedly been tested with a single client.
“I guess this is JPM pushing the regulatory bears,” Dowling added.
Bank CEO Jamie Dimon might be anti-Bitcoin, but he’s also pro-blockchain
JPMorgan Chase became famous among cryptocurrency participants in 2017, when its CEO, Jamie Dimon, openly called Bitcoin a “fraud.”In 2018, Dimon reteriated his position saying that he did not ” really give an S …”about Bitcoin.
However, at the 2019 World Economic Forum in Davos, when the CEO of JPMorgan Chase was asked if he was satisfied when the cryptocurrency plummeted last year, he responded negatively and followed up with positive comments about the technology that supports it.
Specifically, Dimon noted that he is pro-blockchain, despite the excessive hype around the technology. In his opinion, blockchain is a better replacement for certain online databases:
“Blockchain is a real technology, it’s just a database that we can ALL ACCESS that is kept up to date.”
In fact, the banking giant has been researching blockchain since 2016, when the Quorum white paper was first published.
The announcement has received a mixed reaction from the community
Changpeng Zhao, the CEO of Binance, greeted the first American banking cryptocurrency, referencing Mahatma Ghandi’s alleged quote ” First They ignore you, then they laugh at you, then they fight you, then you win:
Reached out to Ripple for further comment on the matter. In response, Ripple’s team sent the link to the tweet of its CEO Brad Garlinghouse, who, in turn, criticized the concept of digital currencies issued by the bank (which he calls “bank coins”) and JPM Coin specifically, citing their centralized structure:
In particular, two years ago, Garlinghouse wrote an article arguing that such projects, where bank remittances are made using unique digital tokens, are wrong and would inevitably result in “an even more fragmented monetary landscape than we have today”:
“If banks from different digital asset groups want to set up trades with each other, they will have to market among their unique digital assets or trade between their digital assets and a common fiat currency. What a mess!”
However, some members of the community seem to have more confidence in JPM Coin, suggesting that the new token is capable of achieving widespread use and could therefore outperform Ripple in the future. Multicoin Capital partner Tushar Jain wrote:
Bloomberg Business editor Joe Weisenthal expressed a somewhat similar view:
While it might be too early to know whether JPM Coin will transfer to public blockchains and gain greater recognition among crypto market participants, some seem perplexed by its current capabilities. Therefore, Nathaniel Popper, author of the book “digital Gold, A History of Bitcoin,” tweeted: