JP Morgan, the multinational banking and financial services powerhouse, has announced its development of JPM Coin, the firm’s new stablecoin-like token pegged to the U.S. dollar, and its forthcoming deployment in payment settlement trials later this year.
The launch of the token marks the first time a major U.S. bank has moved to create its own cryptocurrency-inspired asset. JPM Coin will be built on the Quorum blockchain, which is a private fork of Ethereum that Morgan engineers have been working on since 2016. The company had previously considered spinning off Quorum into an independent project.
Morgan is reportedly planning to make the digital coin interoperable with other mainstream blockchains in the future. JPM Coin will start out being deployed in limited payments trials. Notably, Morgan processes trillions of dollars’ worth of transactions daily.
JP Morgan blockchain head Umar Farooq noted that the JPM Coin would initially be targeted toward facilitating large international settlements, conducting securities transactions, and replacing the use of dollars in the company’s treasury services operations.
“The applications are frankly quite endless; anything where you have a distributed ledger which involves corporations or institutions can use this,” Farooq said on the news.
“Pretty much every big corporation is our client, and most of the major banks in the world are too,” he later added.
JPM Coin will rely on a deposit system, where tokens will only be accessible after a fiat deposit has been made to the bank. At this point, the tokens can be used by clients to make blockchain-based payments. The firm will “burn” the requisite amount of tokens when clients cash out their coins.
Mainstream Media Calls It Cryptocurrency, Experts Say Nay
Blockchains are, by definition, public and open systems. JPM Coin will be closed and permissioned, and analysts and pundits throughout the cryptocurrency space have quickly jumped on these points.
“I see folks referring to it as a cryptocurrency — it’s not a cryptocurrency,” Jerry Brito, executive director of non-profit research organization Coin Center, said in the wake of the announcement.
“A cryptocurrency is one that is open and permissionless, if you want to download it, you don’t need permission; you just need some software.”
And others have questioned the value proposition of the token project since it won’t enjoy the advantages inherent to more open cryptocurrencies.
“It appears that JPMorgan’s new cryptocurrency, JPM Coin, is just like all the other cryptocurrencies tied to the value of a dollar, but less useful, because it can’t move anywhere beyond the walls of JPMorgan,” New York Times correspondent Nathaniel Popper noted on Twitter.
Bad News for Ripple?
Cryptoverse payments play Ripple is trying to make the international payments system SWIFT obsolete in the years ahead. But with the launch of JPM Coin, its stable of competitors just got that much more stacked.
JP Morgan’s breadth and reach in mainstream financial circles means it has massive advantages over Ripple if the firm eventually goes full steam ahead on using JPM Coin to facilitate its sprawling international settlements business. As saturation amid blockchain payments providers continues to increase, many institutions turning to the blockchain space will feel more comfortable relying on a trusted brand in Morgan compared the upstart Ripple.
But it’s not only JPM Coin that’s bringing the competition.
Last month, SWIFT announced it was linking Corda, the blockchain project of Ripple competitor R3, to its Global Payments Innovation framework, or GPI. The link-up gives SWIFT customers the ability to settle cross-border payments via blockchain.
Whatever ends up happening, it’s clear Ripple has major competition moving in on its turf. Whether the company can weather the saturation and come out on top in the mainstream is an open question for now.