JP Morgan Chase/Bloomberg
The US-based lender is developing a prototype digital coin that it plans to use to speed up payments between corporate customers
Sunday 17, February 2019
(Bloomberg) --JPMorgan Chase is planning to introduce cryptos to modernise one of its most central businesses.
The token,JPM Coin, is based on blockchain technology, a decentralised public ledger of transactions that offers more speed because it doesn’t rely on a central record keeper.
“Many of our clients move money in different ways and they’re looking for a more real-time way to move value around,” Umar Farooq, head of digital treasury services and blockchain, said in an interview.
JPMorgan moves more than $5 trillion in wholesale payments each day, so even a nascent experiment from the banking giant is poised to make waves in the cryptocurrency world.
While some experts questioned the broader impact of a dollar-pegged coin available only to JPMorgan clients, others said the bank’s involvement lends legitimacy to an area that is been rocked by volatility and scandal.
The bank started developing JPM Coin about a year ago in response to client demand and plans to start testing out possible uses with a small number of its institutional customers in the coming months, Farooq said. He declined to name the interested companies.
Similarly, SWIFT has been working on a plan to make overseas transfers more efficient though a campaign known as the global payments innovation initiative. But banks still sometimes run into trouble clearing cross-border payments in real time, Farooq said. JPM Coin could eliminate that problem by allowing instantaneous value transfer, he said.
Japanese lenders including Mitsubishi UFJ Financial Group started working on initiatives such as the MUFG Coin as early as 2016.
New York-based Signature Bank rolled out a digital coin for real-time payments earlier this year, and scores of its institutional clients have started using it to send money to each other, according to Chief Executive Officer Joseph DePaolo. The bank, which had about $46 billion in assets as of 30 September, has seen daily volume in the tens of millions of dollars since the coin’s debut, he said.
Compared with JPM Coin, “there is no difference other than we’re up and running and we already have regulatory approval,” DePaolo said. “They’re trying to do the same thing we are.”
The coin has some differences from a traditional cryptocurrency, according to the presentation. Cryptocurrencies use public, open-access blockchain technology and their value is intrinsic to the coin. A JPM Coin always has a value equivalent to one US dollar and uses JPMorgan’s private blockchain.