JP Morgan Becomes the First Bank to Launch Its Own Cryptocurrency JPM Coin
In the industry first, and probably one of the biggest announcements for 2019, Wall Street banking giant JP Morgan has become the first global banking institutions to launch its own cryptocurrency. Earlier today, February 14, CNBC reported that the JP Morgan engineers have created a new digital token named JPM Coin which it will use for payment settlement between clients.
The report suggest that JPM Coin will be majorly used for institutional purpose between the banks and its clients. Currently, the banking giant moves $6 trillion every day for corporations as part of its massive wholesale payments business.
After the arrival of JPM Coin, a tiny portion of the daily wholesale payments shall be done through the digital token. The trials for the same will start in a few months. To enhance this system further, JP Morgan plans to leverage the blockchain and digital token technology to speed up its several services like cross-border payments and corporate debt insurance.
Umar Farooq, head of J.P. Morgan's blockchain projects noted that “anything that currently exists in the world, as that moves onto the blockchain, this would be the payment leg for that transaction. The applications are frankly quite endless; anything where you have a distributed ledger which involves corporations or institutions can use this.”
The JPM Coin will be the first real-world application of digital currency by the banking sector. In the past JP Morgan CEO Jamie Dimon has been a big critic of cryptocurrencies, especially Bitcoin. However, the JMP Coin’s functioning will be quite different from the currently available decentralized crypto tokens.
Being issued by a bank and used by institutions, the JMP Coin shall be supposedly completely regulated at the time of launch. Also, unlike Bitcoin, the price of JMP Coin won’t be demand driven. Rather it will function more like a stable coin where each JMP Coin can be redeemed against the U.S. Dollar.
Farooq further goes to explain three major applications of the JMP Coin. One os to replace the old wired transfer which take over three days of settlements times. The other for securities transactions by institutional players with faster and instant settlements. And the third application is to easily handle huge amount global transactions by big corporations.
"Money sloshes back and forth all over the world in a large enterprise," Farooq said. "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? That way, they can consolidate their money and probably get better rates for it.”
JP Morgan currently offers financial services to almost 80 percent of the Fortune 500 companies. Hence, they plan to tap this huge corporate base while getting the first-mover-advantage. "Pretty much every big corporation is our client, and most of the major banks in the world are, too," Farooq said. "Even if this was limited to JPM clients at the institutional level, it shouldn't hold us back."