- JP Morgan has developed its own cryptocurrency and one coin is equivalent to a dollar
- Other financial institutions have come out with their own tokens
- JPM Coin will help the crypto market in the US
One of America’s biggest banks announced in a statement on Thursday that it has made a digital coin prototype that can be used to speed up transfers between corporate customers. The digital currency, dubbed JPM Coin, is a blockchain-based token and it will behave like any cryptocurrency. According to JP Morgan, the coin can process payments faster because its public ledger is decentralised. It is not yet known what sets it apart from other cryptocurrencies.
Blockchain technology is currently being used by challenger banks to allow their customers to transfer money internationally at overseas transfer rates that are approximately 65% lower than industry standard. Neo banks also rely on the technology to ensure that funds are made available to recipients within seconds.
While the new JP Morgan product does not target the general population, it is a welcome development in the paytech sector especially during a time when traditional financial institutions are playing catch up with mobile-based banks.
“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, the Head of Digital Treasury Services and Blockchain, told reporters.
JP Morgan reportedly moves over $5 trillion worth of wholesale payments on a daily basis. Observers note that the coin, even if it is still a prototype, is poised to disrupt the crypto market considering the bank’s transaction volume.
It is noted though that JP Morgan is already getting criticism from some experts. Their concern, according to reports, is the broader impact of the coin. Others note that JPM coin will help legitimise cryptocurrencies in general since the sector has been dealing with scandals and volatility in the past few years.
The bank started working on the coin over a year ago. Reports say that it was in response to the needs of its clientele. JP Morgan says that it will be testing the coin with some of its corporate users. The bank did not reveal which corporations will be participating in the testing phase.
JPM Coin will offer corporate transfers greater efficiency if the tests go well. Farooq said that the cryptocurrency will help the bank’s corporate customers send cross-border payments in real time. Crypto’s appearance in traditional banking is not a surprise but seeing it happening in the United States is a surprise. The cryptocurrency market has been struggling to ensure the finance sector that digital tokens are not commodities. During a meeting of finance leaders in Davos, Mastercard’s executives said that cryptocurrencies behave like commodities.
Crypto is doing well in other nations though, as Japanese firms the likes of Mitsubishi UFJ Financial Group have reportedly been working on their own digital token since 2016. New York-based Signature Bank also released its digital currency this year and it is now live. According to the bank, the coin brought in more business for them.
What makes JPM Coin different is the fact that one coin is equivalent to a dollar, the bank says.
“JPMorgan is taking a significant step here’,’ said Adam Grimsley, a finance expert who co-founded crypto hedge Prime Factor Capital. “The first bullet in any war is always the most important, and it looks like this could be the first move in a broader adoption of blockchain and digital currencies by large institutions”, he added.
