JP Morgan to become the first US bank with its own digital coin
|- The bank will start testing its system within a few months.
- JPM Coin will be backed by US dollars and used for instant transactions between clients.
JP Morgan is about to launch its own coin - JPM Coin - that will be used by the bank to settle payments between clients. The system will be launched within a few months in a test mode. At the initial stages, JPM Coin will be applied to a fraction of daily transactions performed by the bank for corporations in the wholesale payments business.
The lender tries to stay on top of innovations to be able to transfer money in a faster and a more efficient way than the old technology like wire transfers can offer. As many services and systems move to the blockchain, they will require faster payment options.
"So anything that currently exists in the world, as that moves onto the blockchain, this would be the payment leg for that transaction. The applications are frankly quite endless; anything, where you have a distributed ledger which involves corporations or institutions, can use this,” Umar Farooq, head of J.P. Morgan's blockchain projects commented.
Apart from that, J.P. Morgan will use JPM Coin to create digital securities.
Each JPM Coin will web backed by the US dollar and act like a stable coin, which means that its value won’t be too volatile. The customers will receive coins after depositing dollars with the bank. Once they use it to pay for something on the blockchain, the bank will destroy them and give the clients back a corresponding amount of dollars.
Considering that 80% of companies in the Fortune 500 are customers of J.P Morgan, the bank wants to capitalize on its large market share in corporate payments. Even if other banks follow suit and create their own coins, J.P Morgan has an excellent chance to get its technology adopted on a scale.
"Pretty much every big corporation is our client, and most of the major banks in the world are, too. Even if this was limited to JPM clients at the institutional level, it shouldn't hold us back,” Farooq added.
Earlier the bank’s CEO Jamie Dimon called Bitcoin a fraud. However, the bank pointed out some key differences between its own digital coin and Bitcoin. Namely, only big institutional clients, banks and broker-dealers will be allowed to use the tokens.
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