There’s a question among banking and fintech companies about how blockchain can help facilitate transactions in better, faster ways. J.P. Morgan has thrown its hat into this ring with the JPM Coin.
The JPM Coin is a blockchain-powered stablecoin pegged to the U.S. dollar, designed to facilitate instant payments. In 2023, the coin expanded to support euro transactions, with a reported $300 billion in transactions since its launch.
This isn’t a “coin,” as we normally understand it, because investors can’t buy it on the market. It’s currently limited to institutional users exchanging between crypto, the U.S. dollar, and (more recently) the Euro.
While some question the coin’s necessity, comparing it to existing bank payment processes, others see it as a faster, more efficient alternative to systems like SWIFT. J.P. Morgan has also hinted at a potential new blockchain-based deposit token, pending regulatory approval. The introduction of JPM Coin signifies a significant step in blockchain adoption within the financial sector.
But what is JPM Coin? Let’s dive deeper into what JPM Coin is, how it works, and the opportunities for investors.
What Is JPM Coin?
Umar Farooq, Head of Digital Treasury Services and Blockchain at J.P. Morgan, defined the JPM Coin as “a digital coin designed to make instantaneous payments using blockchain technology.”
JPM Coin is designed to enable the instantaneous transfer of value between parties holding bank accounts. Accordingly, JPM Coin is a stablecoin pegged 1:1 to the US dollar.
JPM Coin runs on the Quorum Blockchain, a network J.P. Morgan internally developed as a private version of the Ethereum network. A few months after testing, Ethereum venture studio ConsenSys acquired Quorum, bringing J.P. Morgan in as a customer of the blockchain firm.
This technological framework supports the core functionality of the JPM Coin. As stated on the firm’s official website,
“Our inaugural product solution, JPM Coin, is a permissioned system that serves as a payment rail and deposit account ledger that allows participating J.P. Morgan clients to transfer US Dollars held on deposit with J.P. Morgan within the system, facilitating the movement of liquidity funding and payments in the right time.”
Building on this digital innovation with JPM Coin, J.P. Morgan further introduced Coin Systems, a component of Onyx (the arm of the firm’s main blockchain and digital currency efforts), to focus on building financial infrastructure and providing corporate treasury solutions.
Initially, JPM Coin was designed by J.P. Morgan to support transactions denominated primarily in US dollars. In 2023, the New York-based investment banking giant expanded the capabilities of JPM Coin to encompass euro-denominated transactions.
On the June 23, 2023, Siemens AG, a renowned engineering and manufacturing company based in Germany, was the first entity to leverage JPM Coin for euro-denominated payments, as confirmed by Basak Toprak, who heads J.P. Morgan’s Coin Systems for the Europe, Middle East, and Africa regions.
How Does It Work?
The JPM coin is a settlement layer between J.P. Morgan and its clients.
- To start the process, a J.P. Morgan client sends funds to an account, after which the client receives the same amount in JPM Coin.
- Once clients receive their JPM Coin, they can use these digital tokens to facilitate transactions over the Quorum blockchain.
- As a final step of the process, a recipient of JPM Coin can redeem them for US dollars or euros.
Because these transactions happen over a blockchain network, there are significant cost-saving advantages compared to traditionally processed transactions and much faster settlement speeds.
How Can You Buy JPM Coin?
JPM Coin runs on a privately commissioned blockchain and is only available to a few institutional clients at the multi-national bank.
Therefore, buying JPM Coin on a digital asset exchange is impossible as you usually would for blockchain-based digital currencies, such as bitcoin or Ethereum.
If you’re interested in buying stablecoins, some offer excellent returns.
That said, the bank intends to expand the coin's reach, which could allow for some access to the coin if you hold an account with J.P. Morgan. However, it must be noted that there are no plans to provide access at a retail level nor support for OTC trading with the stablecoin.
If you want to purchase JPM Coin as an investment, think again. Because it is a dollar-backed stablecoin, its price will not fluctuate, as seen with many tokens on the market. Rather, its value will always be tied to the U.S. dollar.
However, if you are looking at stablecoins as a store of wealth or a way to add stability to a portfolio, several projects fit this role.
However, you don’t need to buy the JPM Coin to invest in the project's success. Any successes J.P. Morgan realizes from the growth in JPM Coin usage will be reflected in the bank’s revenues and earnings.
What does this mean? Investing in $JPM stock to ride the JPM Coin wave might be a good idea. This allows even retail investors to participate in the revenues generated by institutional clients using JPM Coin and JP Morgan’s systems.
Is JPM Coin a Cryptocurrency?
Following the announcement by J.P. Morgan, many within the digital currency community ruminated over the features of the stablecoin and whether it is indeed a cryptocurrency. By its admission, J.P. Morgan states:
“The JPM Coin isn’t money per se. It is a digital coin representing United States Dollars held in designated accounts at J.P. Morgan Chase N.A. In short, a JPM Coin always has a value equivalent to one U.S. dollar.”
Due to its private and commissioned nature and the fact that the bank verifies the transactions, many within the community believe that the JPM coin needs to fit the criteria of a cryptocurrency.
Additionally, there are questions regarding whether the coin fills any particular demand because banks process payments similarly. JPM Coin is the answer to the SWIFT payment system, featuring much faster settlement times, smaller costs, and reduced error margins.
J.P. Morgan and Blockchain Technology Beyond JPM Coin
These questions have resulted in J.P. Morgan creating a new arm of the blockchain business, Onyx, that will serve as the firm’s main blockchain and digital currency efforts.
According to Takis Georgakopoulos, J.P. Morgan’s head of wholesale payments:
“We are launching Onyx because we believe we are shifting to a period of commercialization of those technologies, moving from research and development to something that can become a real business.”
Circulating rumors suggest that J.P. Morgan is venturing into creating a new blockchain-based deposit token, distinct from its existing JPM Coin. As reported by Bloomberg in September 2023, while J.P. Morgan has already developed the essential infrastructure to support this new digital payment form, its creation hinges on U.S. regulators' approval.
Should this new token receive the necessary regulatory approvals, J.P. Morgan aims to introduce it to their corporate clients within a year. Its primary function will be to speed up money transfers, even to clients of other banks, and simplify cross-border transaction processes.
In a statement to Bloomberg, a J.P. Morgan spokesperson remarked,
“Deposit tokens bring plenty of potential benefits, but we also appreciate that regulators would want to be thoughtful and diligent before any new product gets developed and used. Should that appetite develop, our blockchain infrastructure would be able to support the launch of deposit tokens relatively quickly.”
Investor Takeaway
While the bitcoin community may not take kindly to a bank-issued blockchain-based digital currency, the launch of JPM Coin marks a milestone for blockchain technology adoption in the financial industry. Whether or not this coin becomes an asset on the open market remains to be seen, but we are certain that JPM Coin will have a big impact on financial transaction technology.
FAQs
How can I buy JPM Coin?
Currently, JPM Coin is not available for purchase by the general public. It is designed for institutional clients of J.P. Morgan as part of their wholesale payments business.
What’s the current status of the JPM Coin?
The JPM Coin was introduced by J.P. Morgan in 2019 for US dollar transactions and started its operations in 2020. By 2023, it had been updated to support euro transactions and had facilitated transactions amounting to approximately $300 million.
What are the benefits of JPM Coin?
The primary benefit of JPM Coin is its ability to enable clients to transfer funds to and from their J.P. Morgan accounts instantly and around the clock, unlike traditional banking transactions, which are relatively slower and typically occur only during regular business hours.
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