JP Morgan Chase to Launch its Own Cryptocurrency, JPM Coin
In what is a first for an American Bank, JP Morgan will release its own digital token called “JPM Coin” in order to increase the speed efficiency of settlements between clients of its wholesale payments business.
In a quote given to CNBC, JPM’s head of blockchain projects, Umar Farooq, appeared to support the notion of the company utilizing blockchain technology in other aspects of their business in the future:
“So 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.”
According to Farooq, JPM Coin will initially have three uses. The first is for international payments for large corporate clients, which will settle in real time and at any time of day (not just during business hours), potentially displacing the existing, and frankly antiquated, Swift (Society of Worldwide Interbank Financial Telecommunications) system, where wire transfers could take more than a day to settle, due to different cut-off times and time zones from country to country.
The second is for securities transactions, like debt issuance, where, once again, settlements will be instant. Just last April, JP Morgan performed a test debt issuance on the blockchain, simulating a $150 million certificate of deposit (COD) for a Canadian bank.
The third is perhaps least immediate but potentially the biggest application. JP Morgan’s treasury services business, which essentially holds cash for large companies like Facebook, handles money flow for everything from payroll expenditures to paying suppliers. Last year, that business alone generated $9 billion for JP Morgan.
“Money sloshes back and forth all over the world in a large enterprise,” explained Farooq. “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.”
Initially, only a small amount of JPM Coin will be used in these three areas, as a sort of pilot program.
Last September, JP Morgan CEO Jamie Dimon called Bitcoin a “fraud,” making himself an enemy in the cryptocurrency community, but later walked back his comments, as the company’s announcement today demonstrates.