After calling Bitcoin a ‘Fraud’ in 2017, J.P. Morgan’s CEO Jamie Dimon announced the launch of JPM coin, the US bank-backed cryptocurrency. JPM coin has already been tested successfully and should start operations in the coming months. Transactions, using JPM coins are only available to institutional J.P. Morgan clients that pass KYC verifications.
According to Umar Farooq, Head of Digital Treasury services and Blockchain, ‘JPM Coin is a digital coin, representing US Dollars in designated accounts at J.P. Morgan Chase. JPM Coin always has a value of one US Dollar. ‘
The JPM Coin is similar to a stablecoin, as the value is pegged 1:1 by the US Dollar. Initially, JPM Coin will only be used for US Dollar-based transactions, but over time other fiat currencies will be supported as well.
Three initial applications
The roll-out of JPM coin is tested in three initial applications:
· International payments for corporate clients
· Securities transactions
· Treasury services
The international payment settlement can sometimes take days to be completed. By implementing a permissioned blockchain solutions and issuing JPM coins, that can be converted for US Dollars, international settlements from large institutional clients can be initiated and processed instantaneous, at any time of day. The possibility of instant settlements of security transactions is the second application that is suited for the usability of JPM Coins. The third application offers large institutions to exchange US Dollars they hold in subsidiaries around the world.
Diagram of the transaction process of JPM Coin
JPM transactions
When an institutional investor wants to wire a large sum of money to an international client, usually time is of the essence and that is something that is missing in a traditional international payment settlement. JPM solves this in the following three-step plan:
1. The institutional investor funds their reserve account in US Dollars and receives the equivalent amount of JPM coins.
2. The investor issues a transaction to be transferred to another international J.P. Morgan client.
3. The client received the JPM coins in their account, which can be converted into US Dollars.
J.P. Morgan stance on blockchain and cryptocurrencies
Despite a negative outlet towards, Bitcoin back in 2017, J.P. Morgan has always seen the potential of blockchain technology, as well as being supportive of a properly regulated and controlled cryptocurrency. J.P. Morgan believes JPM coin can bring various benefits to the industry, like reducing clients’ counterparty and settlement risk, decreasing capital requirements and enabling instant value transfer.
As an early adopter of blockchain technology, a first-mover in issuing a bank-backed cryptocurrency and its large market share in corporate payments, JP Morgan has a lot of faith in the adoption of this innovative technology, despite the fact that other banks might also issue their own cryptocurrency.
Concluding remarks
Traditional financial institutions working on implementing blockchain and cryptocurrency is a big step towards massive real-world adoption. A US bank-backed cryptocurrency, in my opinion, is a sign of a maturing market.
Disclaimer: This article is not intended as investment advice. You should always do your own research. All the information provided in this article is based on my own personal opinion. During these challenging market conditions, I strongly urge everyone to thoroughly research projects to potentially invest in. If you do decide you want to invest, only invest money you can afford to lose.
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Linda Willemse