Meet JPMorgan’s JPM Coin: The First Bank-Backed Cryptocurrency

JPMorgan Chase, one of the world’s largest and most famous banks, has revealed its plans to run tests of its own cryptocurrency, JPM Coin. When launched, this first digital coin ever created by a US bank may transform the entire payments business and enhance settlement efficiency.

JP Morgan is rolling out the first U.S. bank-backed cryptocurrency via ⁦@Hugh_Son⁩https://t.co/mwwe8RYowa

— Fred Imbert (@foimbert) February 14, 2019

The US-based multinational lender’s announcement today which came as a surprise to many. The bank is set to start using its digital coin over the next few months — in a test mode — as a part of its push to utilize innovative blockchain-based technology for the bank’s payments business. Initially, tests will involve an only small part of the wholesale transactions. In the future, JP Morgan hopes to increase the use of blockchain technology for instant payment settlements between clients. Each JPM Coin will be redeemable for one U.S. dollar, which positions it as a stablecoin and protects it from volatility. After going through the payment system, the coins will be destroyed, and the bank will deposit the clients’ accounts with the corresponding amount of USD.

What Are JPM Coin’s Use Cases?

Commenting on the move, Umar Farooq, who heads JPMorgan’s blockchain project, described the cryptocurrency as a “payment leg” for global blockchain-based transactions and highlighted the enormous potential of this new technology. He added:

The applications are frankly quite endless; anything where you have a distributed ledger which involves corporations or institutions can use this.

Meanwhile, for now, the main applications of the JPM Coin will be the following:

• Its initial focus will be on international payments performed by big institutional clients. JP Morgan hopes the cryptocurrency will increase the transaction speed in comparison with currently-available procedures, like wire transfers. This will allow such corporate clients to settle payments across borders in real time.
• JPM Coin will also be used for securities transactions.
• It will enable the bank to issue debt on the blockchain and allow large institutional investors to buy the issuance with JPM Coins instantly.
• Finally, the coins will be handy for J.P. Morgan’s treasury services offered to big corporations, where they will replace multibillion-dollar flows.

Currently, the new coin will be available for institutional clients only. However, if the tests succeed, retail investors may also tap into it over time.

A U-Turn

The recent J.P. Morgan developments are especially notable given the long and winding road the bank has walked in regards to cryptocurrencies. Many still remember the autumn of 2017 when JPMorgan CEO Jamie Dimon lambasted Bitcoin by calling it a “fraud worse than tulip bulbs” and promised to fire “in a second” any employee caught trading it. Later Dimon confessed he regretted this criticism. He also said he believes in blockchain technology and its potential for banks. The launch of JPMorgan’s own coin marks another dramatic change in the institution’s stance on digital currencies and provides the bank with an essential advantage as the pioneers in this area. If the project proves to be successful, JPM Coin will be the example of the first real-life cryptocurrency application by one of the world’s largest traditional banks. This move should set a precedent in the banking sector that many other lenders might choose to follow. Do you believe that JPMorgan’s test will succeed and other traditional banks will follow suit? Let us know what you think in the comments below!