One of Wall Street’s fiercest bitcoin critics may have been playing us all along.
JP Morgan, the gargantuan investment bank led by Jamie Dimon, just became the first major US financial institution to launch its own cryptocurrency.
The news was first reported by CNBC, which said that the new crypto token – dubbed “JPM Coin” – will be used by the bank to instantly settle payments between clients. According to estimates, JP Morgan moves more than $6 trillion per day.
In addition to wholesale settlement, JP Morgan blockchain chief Umar Farooq said that the JPM Coin cryptocurrency could be used to create digital securities. CCN.com previously reported that JP Morgan had filed a patent for a blockchain-based system that would allow the bank to issue virtual depository receipts, quite similar to security tokens.
Farooq also revealed that it could serve as a sort of “stablecoin” for clients holding US dollars in international jurisdictions. Per the report, each JPM Coin has a face value of $1.00 and may be swapped for physical greenbacks.
“Money sloshes back and forth all over the world in a large enterprise,” he said in remarks cited by CNBC. “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.”
Once corporate adoption takes off, Farooq said that the bank might even try to expand its cryptocurrency into device-based payments.
While it’s no secret that JP Morgan has devoted heavy research into blockchain development, CEO Jamie Dimon has often sought to make a distinction between blockchain technology and cryptocurrency – the latter of which he has frequently bashed.
He has taken particular aim at public cryptocurrencies like bitcoin, which he at various times lambasted as a “fraud” suitable only for “stupid” investors.
“I could care less what bitcoin trades for, how it trades, why it trades, who trades it. If you’re stupid enough to buy it, you’ll pay the price for it one day”. It can “trade at $100,000,” but it will eventually crash to zero. “Governments are going to crush it,” he said in one memorable interview.
While JP Morgan has laid out what it hopes to do with JPM Coin, it has been less transparent about the technical details of the token. That raises the question – what does the bank mean by “cryptocurrency?”
It’s clear that JPM Coin will exist on a blockchain; however, the bank has not yet revealed what that blockchain would look like, as well as what level of control JP Morgan will retain over its ledger.
Given JP Morgan’s extensive research into enterprise blockchain, regulatory concerns, and the fact that the bank initially plans to use the token as part of its internal operations, it seems likely that the “cryptocurrency” will exist on a permissioned network. In other words, you shouldn’t expect to see JPM Coin listed on your local cryptocurrency exchange.
Nevertheless, with a financial institution as entrenched as JP Morgan taking the plunge into actual blockchain payments, perhaps skeptics will be more willing to give JPM Coin’s decentralized cousins a closer look.
Jamie Dimon Image from REUTERS/Benoit Tessier