CEO of JP Morgan Chase, Jamie Dimon, ridiculed Bitcoin (BTC) whenever he has been asked about his views on the oldest digital currency. He questioned its intrinsic value and the intelligence of investors that had bought into the cryptocurrency.
Then, all of a sudden, Dimon’s tone changed and he became somewhat optimistic about the future of digital tokens and blockchain technology. Unsurprisingly, that day coincided with the public launch of JP Morgan Coin, better known as JPM coin, on Feb 14, 2019.
Critics Turning Into Cheerleaders
Meanwhile, the world’s biggest social media network, Facebook, is said to be secretly building its own digital currency for personal payments. However, the unreleased coin is rumored to be a stable coin instead of a cryptocurrency.
One interesting point here is that both companies want to have control over their tokens and have a say in its future development. JPM Coin and Facebook’s digital token could perhaps become the biggest threat to privacy and decentralization, the two basic pillars of the cryptocurrency and blockchain industries.
While it is surprising to see a bank led by one of Bitcoin’s biggest critics becoming the first American institution to successfully pilot a digital coin, there is no denying that it makes complete financial sense. JP Morgan’s digital token is a stable coin pegged with a 1:1 ratio against the US Dollar. The company intends to use the technology to enable instantaneous money transfers between two parties around the world. JP Morgan believes that one day, this token will be used even for small everyday purchases.
Same as Fiat?
JP Morgan and Facebook will both have a privately distributed ledger for their respective tokens, negating the technology’s primary advantage of transparency. A public blockchain is a trustless system and is the basic building block for any digital currency. Bitcoin evangelist Anthony Pompliano made a compelling case against JPM Coin and other private digital coins in his recent analysis.
Pompliano suggested a scenario where JP Morgan could use JPM Coin to turn itself into a Central Bank and use the ‘printing press playbook strategy’, implying that JP Morgan could print infinite money out of thin air. These fiat-backed, private blockchain, stable coins are perhaps the biggest threat that digital currencies have ever faced in their existence since the launch of Bitcoin.
While cryptocurrencies have traditionally been considered to be a viable alternative to state-backed economies, the rise of private blockchains do not offer any such advantage. Alec Ziupsnys, Chief Strategy Officer at blockchain startup Rhythm Technologies, made a similar argument in a recent Twitter post.
China banned 23 million people last year from buying plane/train tickets because their social credit scores were too low.
That is just the start.
Now tell me again the "benefits" of Facebook or JP Morgan coin over bitcoin.
Do they really outweigh that dystopian future?
— Alec Ziupsnys (@AlecZiupsnys) March 2, 2019
Do you think stable coins that are backed by a private entity and run on private blockchains are better than traditional fiat currencies? Let us know your opinions in the comments below!
Images courtesy of Shutterstock, Twitter.