JPM Coin

What’s better than blockchain in mainstream media? Blockchain in mainstream media with a Tufts alumni. This week, CNBC reported (https://www.cnbc.com/2019/02/13/jp-morgan-is-rolling-out-the-first-us-bank-backed-cryptocurrency-to-transform-payments--.html) on JP Morgan issuing its own cryptocurrency. While Tufts alumni Jamie Dimon had originally bashed Bitcoin as “fraudulent,” he took a more calculated approach by revealing JP Morgan’s approach to the blockchain as having great potential to disrupt many industries. As the first bank to issue a proprietary blockchain based currency, the JP Morgan coin will be used by institutional clients that moves nearly $6 trillion through JP Morgan on a daily basis to settle liquidity needs. JPM engineers expect blockchain to improve efficiency by orders of magnitude compared to the legacy system of moving money through wire transfers.

Furthermore, one JPM coin will be redeemable for one USD. Clients will be issued JPM coin in return for their cash deposits at the bank. After the trade settlement is complete, the JPM coins will be destroyed and redeemed for cash. So in effect, JPM is a stablecoin that will only be used for in house transactional purposes. JPM hopes to secure greater institutional clients by cutting transactions fees with JPM coin. While it will decrease their $9 billion in revenue from treasury services, they hope to make up for the decreased transaction fees with an increase in clients. JPM also hopes to roll out the coin for debt issuance. The use of JPM coin will significantly improve both cost efficiency and settlement times for their institutional clients.

The underlying irony of the JPM coin is the original decentralized currency movement was to remove power from the likes of Central Banks and Wall Street titans. However, that very same blockchain technology used in JPM’s Quorom blockchain platform and JPM coin will help to maintain Jamie Dimon’s centralized banking powerhouse. Clients will remain equally, if not more reliant on the JP Morgan’s treasury services. With JPM claiming first mover advantage in the space, it will be interesting to see if other banks follow suit or if the development costs make it inefficient to build out other bank backed digital assets.