JPMorgan launches its own cryptocurrency; the first for a major United States bank

Daniel Fowler
February 15, 2019

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 a few months, the banking giant with a United States dollars 2.6 trillion balance sheet, plans to start trials of JPM Coin, the digital token created by the financial giant to instantly settle payments between institutional clients. Over time, the bank promised to extend the capabilities to other currencies globally.

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".

J.P. Morgan is preparing for a future in which parts of the essential underpinning of global capitalism, from cross-border payments to corporate debt issuance, move to the blockchain.

JPMorgan says it is the first American bank to create and successfully test this kind of digital coin.

With the introduction of JPM Coin, there are many possible outcomes pertaining to the effect on crypto as payment. Farooq stated that the bank token can be used for "replacing wire transfers for worldwide payments by large corporate clients and cutting settlement times from days to just moments". "The applications are frankly quite endless; anything, where you have a distributed ledger which involves corporations or institutions, can use this". The first will be to settle worldwide payments for institutional clients.

Although some may be surprised by JP Morgan's decision to embrace a technology which some view as potentially superseding the traditional banking world, the bank has previously been clear that it recognizes the vast potential of blockchain technology.

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The final use will be for securities transactions.

"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".

Each JPM Coin is redeemable for a single USA dollar, so its value shouldn't fluctuate, similar in concept to so-called stablecoins.

What do you think about JPM Coin? As reported, the three banks set up the project in October 2017, aiming to slash both the time and costs required for interbank payments using traditional methods.

Finally, corporations could also use JP Morgan's treasury services business in order to take the place of dollar holdings in their subsidiaries all over the world. As such, once after the clients used it, the bank would destroy the coins and return "commensurate number of dollars" to clients. "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?"

Looking further out, the JPM Coin could be used for payments on internet-connected devices if that use for blockchain catches on, Farooq said. That way, they can consolidate their money and probably get better rates for it."Pretty much every big corporation is our client, and most of the major banks in the world are, too", he concluded".

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