JP Morgan reveals its own cryptocurrency, despite Bitcoin scepticism
The new prototype token will be used to settle client payments quickly and securely
JP Morgan has become the first US bank to announce its own cryptocurrency after sustained scepticism around the viability of Bitcoin and other cryptos.
The bank will use JPM Coin, which is still in its prototype phase, to settle payments between its clients and its wholesale payments business.
The new token will be a stablecoin, and while most stablecoins claim to have a 1:1 fiat exchange, this one will be redeemable in fiat currency held by JPM.
This means that one token will equate to one dollar with no value volatility unlike that in other cryptocurrencies.
Although creating a new currency isn't strictly necessary - the bank can still settle payments in the traditional way - JPM said that the coin will be used to carry out faster, more secure payments with the technology than it can currently settle now.
The move is arguably surprisingas CEO Jamie Dimon said back in 2017 that any of the bank's employees caught trading with Bitcoin would be fired for being "stupid", labelling the world's first cryptocurrency as a "fraud".
Despite that, Dimon has long-maintained belief and confidence in blockchain, the technology that underpins cryptocurrencies and other valuable business processes such as manufacturing line management.
"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, said Umar Farooq, head of digital treasury services at JP Morgan in an online Q&A.
"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."
Using a stablecoin on a blockchain allows users to keep track of their money and transfer it rapidly with the maximal security of a distributed ledger, one that would be controlled by JP Morgan.
Having a centralised ledger is something that could be interpreted as a security weakness as the whole point of a ledger's security was the decentralised aspect. But, if you're willing to trust banks to keep your fiat currency then it shouldn't be too much of a stretch to extend that trust to a blockchain network.
The coin will not be available for public investment and its sole use, as of now, is limited to internal transactions and settlements.
IT Pro has contacted JP Morgan for comment but it has not immediately replied.
The coin is still in development and will still have to pass regulatory and money laundering checks before it can be rolled out for use with clients.