With JPM Stablecoin And Blockchain Launch, Here Are the Talking Points
Jamie Dimon, the CEO of J.P. Morgan, at
some point, regarded Bitcoin as a scam and was bearish about the fortunes of
digital currencies. However, Dimon recently announced J.P. Morgan’s entry into
the crypto space with the JPM Stablecoin prototype and Onyx – a commercialized
blockchain and crypto research division.
The global head of wholesale payments at J.P.
Morgan, Takis Georgakopoulos, confirmed that the JPM coin was first
commercially utilized for global payments by a large institutional client in
the final days of October 2020.
So, what changed for JPMorgan? Why is
the US bank now in the crypto space?
Let’s examine some of the talking points
surrounding this move by JPMorgan.
What’s the JPM Coin?
The JPM Stablecoin is a digital currency
designed for B2B instantaneous payments via the blockchain network. At the
moment, it’s still at the testing phase and will only be available to
JPMorgan’s institutional clients. However, It is believed that the move by J.P.
Morgan’s move could boost the larger crypto and blockchain industries who feel
strongly about the mainstream adoption of the blockchain technology.
What the Drive for J.P. Morgan?
According to Georgakopoulos, “it’s time to
move past R&D and begin to commercialize technologies for real business
applications; hence the launching of Onyx.” Each day, J.P. Morgan moves
liquidity up to the tune of $6 trillion across over 100 nations, holding its
place as one of the largest cross-border payment platforms in the world.
However, bank transfers depend on a complex
network of corresponding banks, with payments getting rejected a few times due
to errors or other issues. This instance spurred the introduction of the JPM
Stablecoin and the Onyx network. “J.P. Morgan wants to resolve the issues
surrounding wholesale payments, especially where huge savings could be made if
a better solution is implemented,” according to Georgakopoulos.
“This development will drastically reduce
bank fees on transactions, and also improve security and savings on remediating
transactional mistakes,” says Umar Farooq, Onyx’s CEO.
Another driving factor for J.P. Morgan is
the recent decision by PayPal to offer BTC to its customer base and Square’s
move to add $50 million worth of BTC to its portfolio. Also, demography played
an important role in J.P Morgan’s move. The younger generations prefer Bitcoin to Gold, and in today’s businesses, the preferences of this demographic group drive
most business.
JPM Coin vs Other Cryptos – What’s the Difference?
·
Collateralization
In terms of
collateralization, the JPM Coin is redeemable in traditional currency held by
JPMorgan on a 1:1 basis. Other cryptos such as BTC and ETH, are
uncollateralized and their values are intrinsic to their coins.
For fiat-backed coins such
as Tether, USDC, etc., their reserves are held in banks and the adequacy of
their collaterals vary, although most of them claim a 1:1 redeemability with
fiat collateral.
·
Blockchain Accessibility
JPM Coin runs on a
permissioned blockchain and only J.P. Morgan’s institutional customers who have
passed the company’s KYC can transact with the coin. BTC and ETH blockchain on
the other hand is open to the public. Likewise, the blockchain of fiat-backed
coins is also open to public access.
·
Users
JPM Coin is exclusively
available for use only by institutional customers such as Banks, Corporates and
Broker-Dealer. Other cryptos and stablecoins are primarily available to
investors.
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