In what ended up being a splendid Valentine’s Day gift to banks as well as the cryptocurrency industry, Jamie Dimon announced the rollout of the first-ever bank-backed coin, JPM. Here’s what you need to know about this JP Morgan Cryptocurrency in 7 Key Takeaways.
JP Morgan Cryptocurrency Announcement Rocks Crypto World
The somewhat deceiving title of yesterday’s post on the JP Morgan website read,
“J.P. Morgan Creates Digital Coin for Payments”
Deceiving because it screams an answer to what crypto enthusiasts have been begging for – a way to use cryptocurrency payments in real life situations. Finally, we all thought, a big bank ready to use crypto for global payments! In reality, it’s something completely different. Before we get into that and the other key takeaways, let’s take a look at this proposed JP Morgan cryptocurrency.
What is the JPM Coin?
Having officially pegged themselves as Blockchain Experts, JP Morgan also happens to be the world’s biggest bank, with $2.53 trillion in assets. In the last few months they have worked feverishly to develop and test their own cryptocurrency, the JPM.
This coin will be tethered to the US dollar, so one JPM will equal $1.00. It’s applicable uses when rolled out officially will be severely limited. Only designated institutional clients in JP Morgan’s wholesale payments business will be able to use the token. It’s estimated that $6 trillion per day is currently transacted within this segment using legacy systems and wire transfers.
Their website describes the JPM coin as working like this:
Why This News is Huge
This is big news for several reasons. For one, it’s the first instance of a major bank to dip their toes into cryptocurrency. JP Morgan reports on their site that the token exchange has been tested with one client successfully. Their introduction into blockchain revolves around the enabling of instantaneous payment transfers between their institutional, wholesale customers.
Secondly, the crypto world just about had a stroke upon hearing the news. There’s excitement, disbelief, anger, hope, doubt and curiosity all wrapped up into one Valentine’s Day news bomb exploding on social media.
So we know that the new JP Morgan cryptocurrency has been proposed and it will be backed by USD. We also know that it will only be used (at least in the beginning) by their institutional, wholesale payment clients. The following 7 takeaways offer additional food for thought as we all digest big banking’s official move into crypto.
#1 – This isn’t the first cryptocurrency to be backed by the US dollar.
The mainstream media seems to be going nuts over this as though it’s the best thing since sliced bread. Tether, one of the cryptocurrencies currently pegged to USD, was issued in June of 2017. Currently, it has a market cap of over $2 billion. But still, it’s great that this news has brought attention to the possibility of fiat-backed cryptos. The more the public hears about blockchain technology, the better.
#2 – People are saying this is the end of bitcoin.
News pundits are announcing, that’s it! Bitcoin is dead! Which is a very confusing message to be spreading. It’s unclear why bitcoin would go anywhere or face destruction because of this news since the JPM coin can only be used by the biggest bank’s biggest customers. On the other side of it, bitcoin is free and open for anyone to use, anytime, anywhere. Plus, it offers more benefits to users than the JP Morgan cryptocurrency.
#3 – Other people are saying this is the best thing for bitcoin.
Even the people who shuddered at the thought of a big bank cryptocurrency are kind of happy today. Mostly this is because they felt it might just be the impetus needed to move blockchain technologies into the mainstream. And this time not as a scam or a bubble. But as something backed by and sought after by the biggest bank in America.
#4 – There was no mention of lower transaction fees for these institutional clients.
It seemed odd that the JP Morgan announcement only mentioned the following benefits for their clients when describing their “Digital Coin for Payments”:
- Reduction in settlement risk
- Decreased capital requirements
- Instant transfers
Nothing, nada about lower transaction fees or cost savings to the clients. Low transaction fees are one of the benefits inherent with blockchain technology. Mainly, this is due to the elimination of 3rd parties (like banks).
#5 – Here’s how bitcoin, ethereum and ripple prices reacted in the 24 hours after the announcement.
Bitcoin’s alive and well we are all happy to see.
#6 – This is not a done deal.
In fact, in their own words, the mega bank admits their JP Morgan cryptocurrency is only in initial stages:
“JPM Coin is currently a prototype. As we move towards production, we will actively engage our regulators to explain its design and solicit their feedback and any necessary approvals.”
#7 – Regulators haven’t yet reviewed it.
Catching that last sentence from the quote in #6, we see that regulators have not yet been engaged on this crypto project.
No matter what happens, and regardless of how you feel about it, we will ALL be listening in to the aftermath of JP Morgan’s blockchain announcement party. Join us on our journey to blockchain adoption!
Also published on Medium.