On Thursday, February 14, JP Morgan Chase entered the crypto record books when it became the first U.S based bank to announce that it would release a cryptocurrency.
The soon to be launched cryptocurrency is dubbed JPM Coin and is set to undergo trial within the JP Morgan Chase payments system within the next few weeks.
In this article, we cover five things you should know about JP Morgan’s JPM coin.
1. JPM Coin Is a Type of Stablecoin
It is important to note that the new cryptocurrency by JP Morgan is a stablecoin similar to what social media giants Facebook is working on.
As per the report, the JPM coin will be backed one-to-one against the U.S dollar meaning that its prices will not fluctuate like that of Bitcoin. It will follow the stablecoin model used to operate Tether (USDT), USDC and Gemini Dollar (GUSD) but will feature a significant difference.
While the stablecoins mentioned above require that its issuers maintain a banking reserve, JP Morgan will not use its fund to fill up JPM coins reserve.
Clients who use the cryptocurrency for settling payments are required to deposit fiat into a bank while JP Morgan issues the equivalent in JP coin. Also, once the transaction between the parties is completed, the bank will issue a fiat to the receiving party and destroy the already used coins.
2. JPM Coin Won’t Be For Retailers
Unlike Bitcoin and other cryptocurrencies which are publicly available and traded on exchanges, the JP coin will mainly serve institutional clients of JP Morgan Chase.
Instead of using many decade old networks like SWIFT to send payments, corporate clients of the bank can use JP coin to facilitate payments in real time. That will ultimately remove the need for these clients to wait sometimes for more than one day for transactions to complete.
JP Morgan’s blockchain team cited in the report that they want to rely on the speed embedded into blockchain smart contracts to meet the need of its clients, something that SWIFT is already working on with R3 Corda’s blockchain.
3. JP Coin Will Aid Securities Transactions
The new cryptocurrency will serve as a unit of payment for institutions who buy securities from JP Morgan.
Instead of relying on wire transfers which takes longer, clients could make payments for the securities using JP Coin and have them delivered in real time through blockchain technology.
4. JPM Coin Could Be Used For Online Payments In The Future
Although JP coin is yet to undergo its trial within the JP Morgan Chase payments ecosystem, the firm is already lining the cryptocurrency up for more significant assignments.
Head of J.P. Morgan's blockchain projects, Umar Farooq asserted that JP Coin might serve as a means of payment on internet-connected devices, perhaps in a similar manner like Bitcoin and other cryptocurrencies.
He did not provide a timeline for when such integration with the mainstream would happen but only said it would come true if “that use for blockchain catches on.
5. JPM Coin Will Be The First of Many
At this point, it is clear to see that JPM coin is not the only blockchain use case that the banking mogul is exploring. The firm still maintains a unit for blockchain projects with Head Umar Farooq saying in the release report,
"The applications are frankly quite endless; anything, where you have a distributed ledger which involves corporations or institutions, can use this."
So we’ll keep an eye out on what future use cases, JP Morgan Chase will find for blockchain technology and DLT within its banking ecosystem and beyond.
On a broader scale, the firm admitted that rival banks will likely follow their steps by issuing a cryptocurrency soon. We already saw one, albeit in Japan where Mizuho Bank revealed plans to launch their cryptocurrency to support remittances. How many bank-backed cryptocurrencies will we see within the next decade? That is a question only time can answer.
Meanwhile, we welcome JP Morgan to the fascinating world of cryptocurrencies!
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