JP Morgan Issues Own Stable Coin – Review

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Three weeks ago on Valentine’s Day, JP Morgan Chase launched their very own crypto coin, ‘JPM Coin’ the first of its kind to be backed by a major US bank. The banking giant has an impressive daily trading capacity of $6 trillion. The bank hopes to use the cryptocurrency to settle payments between their clients. Following the launch of the coin, JP Morgan Digital Services Head Umar Farooq, stated that the bank fully supports cryptocurrency and blockchain technology as long as they are properly regulated.

How will it Work?

JPM Coin is exclusively for internal use and will be used to facilitate transfer of payment between institutional accounts and is not for retail customers. To be clear, the coin is not a cryptocurrency but a stable coin specifically for the in-house use of the bank. The coin will run on the bank’s blockchain platform, Quorum, which is a private and permission platform meaning that the users will have to get the permission from the bank itself.

One interesting fact about this coin is that it is in direct competition with Ripple, which currently holds the third highest market cap. Ripple has also been providing similar services of global funds transfers and payments, made using their own stable coin XRP. For the moment, the coin is strictly for payments and fund transfer between businesses that have accounts with the bank.

Advantages of JPM Coin

By JP Morgan taking the step toward adoption of blockchain technology, some financial and tech experts say that the move instills confidence in its clients. According to fintech industry group head at the law firm of Duane Morris Ms. Cindy Yang, having a system that is solely controlled by the bank itself eliminates the question of security and regulation. The move by the bank will push other financial institutions to do the same and create a healthy competition zone.

Also, having a centralized system limits the level of exposure, as there is security for its brand as a bank and the same on the balance sheet. In retrospect, there is no harm in having a centralized system since financial records of this nature are up to the discretion of the user and the bank as the trustee.

The move by the bank to launch a coin for its customers to make payments across the world and quickly is seen as a positive break towards further adoption. A case could be made that if more banks can do the same, it would open opportunities to make the technology used by these banks more accessible in future. It could even create retail opportunities if the banks extend the blockchain technology.

Exceptions

Blockchain technology is decentralized in nature but this is not the case with the coin JPM. Experts are concerned that the bank may not have needed the coin at all as even the blockchain platform they are using is controlled by the bank. They even disqualified it as a cryptocurrency altogether, according to one forward tweet by crypto pioneer Nick Szabo (@NickSzabo) where he stated that the coin was not decentralized, not borderless, not open and therefore did not meet the threshold of cryptocurrency qualifications.

Nouriel Roubini (@Nouriel) backed the same and tweeted that JPM is a joke to say the least, as everything about it goes against the basic principles of cryptocurrency and blockchain. From the permissions, to the private controlled blockchain, the nose of JP Morgan in the transactions and the fact that the whole thing is privatized and its not accessible to the public.

Ripple CEO Brad Garlinghouse (@bgarlinghouse) tweeted his disappointment at JP Morgan missing the point and still trying to control the way cryptocurrencies work but from a misguided point of view. He tweeted that banks may be changing their attitude towards cryptocurrencies but JPM Coin is moving in a completely opposite direction and skewing the meaning of cryptocurrency and causing confusion.

David Gerard, author of the ‘Attack of The Fifty Foot Blockchain’ is of the opinion that the bank did not even need a blockchain platform at all. According to him, the bank could do exactly the same thing on their very own data base and they are just using the excuse of faster transactions to delve into blockchain and cryptocurrency.

 

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