JP Morgan has created the first cryptocurrency to be backed by a U.S. bank but you can’t buy any and it’s not obvious what the point of it is.
“The JPM Coin is based on blockchain-based technology enabling the instantaneous transfer of payments between institutional accounts,” said an announcement based on gibberish-based grammar. In essence this seems to be a digital mechanism designed to speed up the movement of money within JP Morgan’s systems, nothing more.
They gave the exclusive to CNBC, which also got to chat to Umar Farooq, head of JP Morgan’s blockchain projects, who likes to start his sentences with ‘so’. “So anything that currently exists in the world, as that moves onto the blockchain, this would be the payment leg for that transaction,” he said. “The applications are frankly quite endless; anything where you have a distributed ledger which involves corporations or institutions can use this.
“Money sloshes back and forth all over the world in a large enterprise. 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 for it.”
So in essence JP Morgan is offering to exchange their client’s dollars for cryptocurrency tokens representing exactly the same amount, which it reckons they’ll be able to move around more easily. This is quite a different concept to something like bitcoin, which has seen massive fluctuations in its value against the dollar. One JPM Coin will always be worth one dollar.
JP Morgan’s Q&A sheds a bit more light on the matter. It has much more in common with stablecoin than cryptocurrency in that it’s strictly pegged to the dollar, so it’s basically a digital IOU. The big difference is that JPM Coin is private and only available to JP Morgan institutional customers. Once again: the main point of it is to reduce settlement times, nothing more.
Right now JPM Coin is still in its prototype phase and the stated use-case feels like a bit of an anti-climax for people hoping this signifies the next phase of the cryptocurrency revolution. Maybe the such a public endorsement of the technology by a big establishment name will catalyse something, but it’s unlikely to be the kind of total financial autonomy for the individual dreamt of when bitcoin first arrived on the scene.