Global investment bank J.P. Morgan Chase announced the creation of its first successful Cryptocurrency. IBM is looking into Stablecoin cross-border payments
ast month, American multinational investment bank and financial services company J.P. Morgan Chase, announced the creation of its first successful Cryptocurrency. The JPM Coin is a digital coin based on the relatively new blockchain technology.
It will allow instantaneous transfer of payments between institutional accounts. Umar Farooq, head of Digital Treasury Services and Blockchain, clarifies that the JPM Coin isn't "money." It is a "digital coin representing United States Dollars held in designated accounts at J.P. Morgan Chase N.A."
When one client sends JPM Coins to another though blockchain, it is received almost instantly. The receiver then can redeem the coin for the equivalent amount of U.S. dollars. Transactions using JPM Coin will reduce the typical settlement time.
J.P. Morgan hopes this coin will broaden to other currencies as well in the future, but for now, JPM Coins are only USD based.
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Umar Farooq explains:
First, a J.P. Morgan Client deposits an amount to a designated account and receives an equivalent number of JPM Coins.
After, the JPM Coins received are sent for transactions over a blockchain network with other J.P. Morgan clients.
Finally, the new holder of the coin redeem them for USD at J.P. Morgan.
Jamie Dimon, J.P. Morgan Chase boss, who once called Bitcoin and other Cryptocurrencies a "fraud" and implied how global governments will shut them down, has regretted his words ever since.
During a Harvard Business Review Interview last year, Dimon made a point of calling blockchain technology "real," hinting that J.P. Morgan is “testing it [blockchain] and will use it for a whole lot of things.” On the official news and announcement website of J.P. Morgan chase, they now state:
"We have always believed in the potential of blockchain technology and we are supportive of cryptocurrencies as long as they are properly controlled and regulated. As a globally regulated bank, we believe we have a unique opportunity to develop the capability in a responsible way with the oversight of our regulators.
Ultimately, we believe that JPM Coin can yield significant benefits for blockchain applications by reducing clients’ counter party and settlement risk, decreasing capital requirements and enabling instant value transfer.
J.P. Morgan claims JPM Coins are completely different from other cryptocurrencies. For collateralization, The JPM Coins are 1:1 redeemable in fiat currency held by J.P. Morgan, while Bitcoins, Ether and others are uncollateralized and the value is intrinsic to the coin.
On the Blockchain, other cryptocurrencies are public. JPM Coins are not only permissioned with built enterprise grade secure blockchain solutions, but also only institutional J.P. Morgan customers are able to access these coins.
They are designed exclusively for institutional customers like banks, brokers, dealers, and corporates. The coin will be first issued on Quorum, a J.P. Morgan Blockchain technology, and subsequently will extend to other platforms.
JPM Coin will be able to operate on all standard Blockchain networks. It is currently a prototype. It will be tested on a number of selected institutional clients with plans to expand later this year. J.P. Morgan is not the only company looking to expand their business to cryptocurrency and blockchain.
Jesse Lund, head of blockchain solutions for IBM, hinted during an interview with Cheddar that market demands is driving IBM to develop stable-coin solutions for financial institutions.
He then goes on to say how banks around the world sees "tremendous business benefit to issue stablecoins in their native fiat currency." IBM also hinted the hopes of creating an ecosystem of various digital assets, with many different types of digital assets - including stablecoins.
“We’re really feeling excited that we’re on a roll to build something new and revolutionary that’s really going to change the landscape of cross-border payments.”
When presented with questions about how IBM's solution compares to J.P. Morgan's in house USD-backed JPM Coin, Jesse Lund explains: IBM's solution would be "somewhere in between," and that "US banks re doing what's best for them."
“It’s not a proprietary coin like JP Morgan's solution, although I think what they’re doing makes a lot of sense for them. [...] What JPM’s doing also adds tremendous validation to what we’re doing. But our view for stablecoins is really that they should be more broadly accessible and what World Wire seeks to do is to provide fungibility of digital assets across financial institutions.”
IBM started its collaboration with Stellar (XLM) in 2017 to use its services and power the "World Wire Network." Their plan was finalized in mid 2018.
Stellar is an open sourced, decentralized protocol that focuses on transfers between fiat currency and digital currency. It is supported by the Stellar Development Foundation; a nonprofit organization. XLM digital currency will be used in IBM’s cross-border payment network called Blockchain World Wire (BWW).
There are other firms like Ripple that are also working on solutions to make cross-border transactions easier for financial companies, firms, and banks. According to Lund, US banks are "very interested" in replacing the current SWIFT system to stablecoins to send cross-border.
The reason banks are more invested in stablecoins compared to other digital currencies is because stablecoins are linked 1:1 to fiat currencies making them more "stable." Lund did not give details on when this project will be released, but did confirm it would be on its World-Wire Platform.