JPMorgan has launched its very own cryptocurrency, making it the first major American bank to do so.
The cryptocurrency, dubbed ‘JPM Coin’, will “make instantaneous payments using blockchain technology.”
The bank’s JPM Coins are “stable coins,” which means that they are tied to a fiat currency. Each JPM Coin is equivalent to one US dollar.
“When one client sends money to another over the blockchain, JPM Coins are transferred and instantaneously redeemed for the equivalent amount of U.S. dollars, reducing the typical settlement time,” said Umar Farooq, the firm’s head of Digital Treasury Services and Blockchain.
JPMorgan explained how the digital currency works by outlining three basic steps of the process:
- Coin Issuance – a client commits deposits to a desginated account and receives an equivalent number of JPM coins.
- Coin Transfer – JPM Coins are used for transaction over a blockchain network with other JPMorgan clients.
- Coin Redemption – holders of JPM Coins redeem them for USD at JPMorgan.
JPM Coin is currently a prototype that will be tested with a small number of J.P. Morgan’s institutional clients. The bank says it has plans to expand the pilot program later this year.
The JPM Coin will be issued on Quorum Blockchain, JPMorgan’s enterprise private blockchain, and then extended to other platforms. It will be operable on all standard Blockchain networks.
“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,” Umar Farooq added.
Regarding potential regulatory hurdles, Farooq said: “As we move towards production we will actively engage our regulators to explain its design and solicit their feedback and any necessary approvals.”
JPMorgan said that over time it plans for JPM Coin to be extended to other currencies.