As the value of Bitcoin and other cryptocurrencies continues to fluctuate while governments consider marketplace regulations, J.P. Morgan announced that is launching the first US bank-backed cryptocurrency, JPM Coin.
“The JPM Coin is based on blockchain-based technology enabling the instantaneous transfer of payments between institutional accounts,” the press release stated. “Exchanging value, such as money, between different parties over a blockchain requires a digital currency, so we created the JPM Coin.”
According to J.P. Morgan, the coin differs from other cryptocurrencies, such as Bitcoin and Ethereum, because they are not collateralized, making their value specific to the coin. The coin is also distinguishable from fiat-back Stablecoins, which are reserves held at banks that claim to have a 1:1 fiat collateral.
The JPM Coin, though, is “1:1 redeemable in fiat currency held by J.P. Morgan.” The blockchain technology is permissioned, making it enterprise-grade secure because it is built by J.P. Morgan in collaboration with its partners. Use of the JPM Coin is only for institutional customers.
“JPM Coin is currently a prototype that will be tested with a small number of J.P. Morgan’s institutional clients, with plans to expand the pilot program later this year. JPM Coin is currently designed for business-to-business money movement flows, and because we are still in a testing phase, we don’t have plans to make this available to individuals at this stage. That said, the cost-savings and efficiency benefits would extend to the end customers of our institutional clients.”
J.P. Morgan said it has long supported the potentials of blockchain technology and the advancement of properly controlled and regulated cryptocurrencies. As it moves toward production of the JPM Coin, J.P. Morgan will continue to seek feedback and approval from its regulators.
“As a globally regulated bank, we believe we have a unique opportunity to develop the capability in a responsible way with the oversight of our regulators. Ultimately, we believe that JPM Coin can yield significant benefits for blockchain applications by reducing clients’ counter-party and settlement risk, decreasing capital requirements and enabling instant value transfer.”