CNBC reported that JP Morgan has developed the JPM Coin, a digital toke that will be used to settle transaction between clients of its wholesale payments business. It is still in trial version so only a small number of payments will be transmitted.
With over $6 trillion dollars’ worth of wholesale payments carried out by the bank, the use of JPM Coin will make these transactions faster and more cost efficient. Umar Farooq, Head of JP Morgan’s Blockchain projects stated, “ 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.”
When the international payments are tested, it will be one of the first real-world applications for a cryptocurrency in banking.
The JPM Coin is a stablecoin, which means it is pegged to the US dollar, to ensure the value of the coin. Clients will be issued the coins after depositing dollars at the bank; after using the tokens for a payment or security purchase on the blockchain, the bank destroys the coins and gives clients back a commensurate number of dollars.
Farooq explains to CNBC the three applications that JPM Coin can be used for today. As he explains, “The first is for international payments for large corporate clients, which now typically happens using wire transfers between financial institutions on decades-old networks like Swift. Instead of sometimes taking more than a day to settle because institutions have cut-off times for transactions and countries operate on different systems, the payments will settle in real time, and at any time of day.” He adds, “ The second is for securities transactions. In April, J.P. Morgan tested a debt issuance on the blockchain, creating a virtual simulation of a $150 million certificate of deposit for a Canadian bank. Rather than relying on wires to buy the issuance — resulting in a time gap between settling the transaction and being paid for it — institutional investors can use the J.P. Morgan token, resulting in instant settlements.”
The final use would be for huge corporations that use J.P Morgan’s treasury services business to replace the dollars they hold in subsidiaries across the world. Unseen by retail customers, the business handles a significant chunk of the world’s regulated money flows for companies from Honeywell International to Facebook, moving dollars for activities like employee and supplier payments. It generated $9 billion in revenue last year for the bank.