On Thursday, February 14th, JP Morgan Chase announced that they are launching the first US bank-backed cryptocurrency. The product will be known as the "JPM Coin", which is a digital token that will be used to instantly settle transactions between clients and its wholesale payments business. JP Morgan currently moves roughly $6 trillion around the world each day for corporations. In the current financial system, it costs a lot of money and takes a great deal of time to send wires, especially cross-border. Western Union, widely known for its cross-border wire payments, currently charges around 15% of the total transaction in fees and takes several days to receive the payment. This is absurd.
With the creation of the blockchain, the current financial system will have the opportunity to utilize this technology to better their infrastructure. This will allow corporations to send money cross-borders in a real-time settlement, and for a very small fraction of the price as well. Blockchain now puts SWIFT in a sticky situation because countries and institutions have been using SWIFT to send wires across borders for quite some time now. SWIFT's biggest competitor could soon be digital currencies. It is unclear when the final product will be available, however, JP Morgan is currently running a trial with the JPM Coin.
https://www.cnbc.com/2019/02/13/jp-morgan-is-rolling-out-the-first-us-bank-backed-cryptocurrency-to-transform-payments--.html
3 comments:
It will certainly be interesting to see where this takes JP Morgan. I think one thing that often scares away potential investors from the crypto asset class is the fact that no institution will be backing it up. Knowing that the full weight of JP Morgan is behind it is a potential game-changer. Eliminating transaction costs is something that has been seen as productive to markets as it is making them more efficient. I'd agree that Block chain technology certainly poses a threat to current market participants who make profits off of the transfer of funds.
It's definitely interesting to see the market's response to the increased popularity of cryptocurrencies. Given what the article said about the logistics of the JPM Coin, it appears to lack most (if not all) of the inticing aspects of cyrptocurrency. It makes me curious to know what JP Morgan hopes to gain from this move, other than just the opportunity of replacing slow wire transfers.
Greg -
I'm going to have to play devil's advocate and fight against your statement against "no institution will be backing it up". In 2017, Bank of America filed the most patents related to blockchain and crypto assets. Fidelity announced last year that they will be offering crypto custody through their new arm known as "Fidelity Digital Assets". Fidelity has also been mining Bitcoin and other crypto assets since 2015. Goldman Sachs purchased a fintech company known as Circle in 2018, and this app allows people to buy and sell crypto assets. Circle also owns one of the largest crypto exchanges in the US, known as Poloniex. So essentially, Goldman owns a crypto exchange. Top talent from Wallstreet and SV are leaving their companies to go work on these projects in this space. In my final thoughts, I'm going to have to respectfully disagree with your statement. The institutional backing has already been established in this space.
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