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J.P. Morgan Chase has become the first major U.S. bank to roll
out its own cryptocurrency.
The bank announced
on Feb. 14 it will trial-run its digital token, JPM Coin, which will enable
clients to settle payments immediately.
When Chase begins testing these international payments, it will
mark one of the banking world’s first forays into using cryptocurrency.
Previously, the banking industry has viewed this asset class as
too speculative, and as recently as 2018, Chase banned its credit card customers from buying bitcoin.
Chase’s bitcoin-skeptic CEO is bullish on
Although Chase CEO Jamie Dimon has publicly slammed bitcoin,
he’s hopeful regarding the usage of blockchain and other regulated digital
Retailers, however, might never get to use JPM Coin – only
the bank’s institutional clients, which have gone through regulatory checks, can currently
How it works
The technology is simple: A client will send someone money over the blockchain,
and JPM coins “are transferred and instantaneously redeemed for the equivalent
amount of U.S. dollars.” This process will reduce the average settlement time,
which can currently take more than a day.
Each JPM Coin equals one U.S. dollar, and clients can use the coin
to make payments or buy securities on the blockchain. Once the transaction is
complete, Chase destroys the coins.
J.P. Morgan plans to extend its coin to other major currencies
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JPM Coin’s applications
head of digital treasury services and blockchain at J.P. Morgan, told
CNBC the JPM Coin will feature three early applications.
execute the bank’s heavy-hitter corporate clients’ international payments in
real time. Until now, the bank has used wire transfers – which sometimes take
more than one day to settle due to transaction cut-off times – to handle these
Another will be earmarked for instant securities transactions
settlements. The third will serve corporations that employ the bank’s treasury
services business to substitute their global subsidiaries’ dollars, a business
that made Chase $9 billion in 2018.
“Money sloshes back and forth all over the world in a large
enterprise,” Farooq said. “Is there a way to ensure that a subsidiary can
represent cash on the balance sheet without having to actually wire it to the
unit? That way, they can consolidate their money and probably get better rates
Farooq said clients
might be able to use the JPM Coin for payments on internet-connected devices if
blockchain gains traction in that arena.
J.P Morgan is also banking on this move to get other banks
“Pretty much every big corporation is our client, and most of the major banks
in the world are, too,” Farooq said. “Even if this was limited to JPM clients
at the institutional level, it shouldn’t hold us back.”