The management at J.P. Morgan Chase, the world’s sixth-largest bank with $30 trillion in assets under custody, is reportedly planning to begin testing its highly-anticipated cryptocurrency, called “JPM Coin.”
JPM Coin’s initial testing will be carried out with the financial institution’s corporate clients. This, according to a recent report from Bloomberg, which revealed that the bank’s customers would experiment with the coin’s new underlying technology.
JPM Coin Still Needs Regulatory Approval
According to Umar Farooq, the Head of Blockchain Initiatives at J.P. Morgan, the trials involving JPM Coin will focus on conducting fast and cost-effective transactions. The transfers made with the bank’s cryptocurrency may include payments settled between companies and transactions involving traditional bonds.
As confirmed by J.P. Morgan, the institution has not yet obtained regulatory approval to launch its own crypto-based token.
JPM Coin May Be Converted to Fiat Money, After Receiving Payment
Introduced in February 2019, the JPM Coin has been implemented on the Quorum platform, a private (permissioned) implementation of the Ethereum (ETH) blockchain network. Designed primarily as a stablecoin for expediting bank-to-bank transfers, the JPM Coin will be backed with fiat currency.
Before conducting transactions with JPM Coin, users will be required to have the equivalent amount (being transferred with the coin) in fiat deposits. As explained in its technical documentation, the recipients of a transfer in JPM Coin will be able convert the bank’s cryptocurrency to cash.
“Licensing and Approval” Is Time-Consuming
J.P. Morgan’s management confirmed that its crypto will only be backed by the USD when it’s first introduced. However, the giant Wall Street investment bank intends to allow other major currencies to be linked with the JPM Coin in the foreseeable future.
Commenting on the current state of development of the JPM Coin, Farooq remarked:
The technology is very good, but it takes time in terms of licensing and approval. It must be explained.
Farooq added that the JPM Coin may also be used to finalize transactions involving traditional commodities and bonds. According to the J.P. Morgan executive, the bank’s clients in Europe, Japan, and the U.S. have already expressed an interest in using the institution’s cryptocurrency to settle typical business transactions.
“Reducing Clients’ Counterparty and Settlement Risk”
Although J.P. Morgan CEO Jamie Dimon had initially referred to Bitcoin (BTC), the world’s most dominant cryptocurrency, as a fraud (but later admitted he didn't understand the technology), the investment bank’s website now states:
We have always believed in the potential of blockchain technology and we are supportive of cryptocurrencies as long as they are properly controlled and regulated. As a globally regulated bank, we believe we have a unique opportunity to develop the capability in a responsible way with the oversight of our regulators.
It adds: “Ultimately, we believe that JPM Coin can yield significant benefits for blockchain applications by reducing clients’ counterparty and settlement risk, decreasing capital requirements and enabling instant value transfer.”