JPMorgan Chase recently announced that it is planning to use a new blockchain technology to advance dollar-based payments for their clients in corporate banking. This is noticeably one of the first cases of global banks incorporating cryptocurrency in their business.
In an article published in Financial Times, JPMorgan Chase will use "JPM Coins" in expediting dollar-based payments for its banking clients. This will be transferable over a blockchain and it can be purchased and redeemed at a fixed 1:1 ration.
For those who do not know what a blockchain is, it is a technology that allows multiple parties to have concurrent transactions to a digital ledger that is hard to be altered. JPMorgan is currently using this as a way of exploring its potential uses to their clients.
In the jargons of people involved in JPMorgan, this setup makes the "JPM Coins" as "stablecoins". The blockchain will also facilitate near-fast settlement of these money transfers and mitigate counterparty risk.
The "JPM Coins" blockchain is still in prototype stage. JPMorgan is planning to roll it out only to a small number of clients first within some few months.
This new approach is somehow contrasting to what the company's take on cryptocurrency, particularly in Bitcoin. In an article published in Quartz, JPMorgan CEO Jamie Dimon said in 2017 that the bitcoin system is a "fraud".
So, did the JPMorgan CEO finally change his views about cryptocurrency? Quartz noted that the 2017 infamous statement seems to be referring to the rampant speculations in bitcoin while it was at its peak of crypto-market mania.
The article also pointed out that JPMorgan's blockchain technology is not the same way as to how bitcoin is working. "JPM Coin" is still controlled as its value is based on reserves kept at the bank.
Are the regulators good with JPMorgan's plans? It seems like the bank does not really need any approvals or any opinions since it's only an internal test.
At the same time, some financial firms thought blockchain is not really a game changer as how JPMorgan wanted to paint it. For example, Spanish bank Santander used to roll out their payment service using blockchain but it was found more expensive than use transfer services like TransferWise.
JPMorgan is also not the first Wall Street bank that got into cryptocurrency. Goldman Sachs previously told in an interview with The New York Times that the bank is going to start a bitcoin trading desk.