- JP Morgan sees interest from clients in the U.S., Europe, and Japan on the potential for its digital coin
- The JPM Coin is expected to speed up trading of securities such as bonds
- The trial could begin around the end of the year, pending relevant approval
On June 25, 2019, a Bloomberg Japan report detailed the plan for a trial to introduce JP Morgan’s in-house digital token – JPM Coin – to help speed up bond transactions and intercompany remittances. JP Morgan Chase is looking to start the trial of its much-awaited JPM digital coin for corporate customers in the US, Europe, and Japan.
Umar Farooq, the investment bank’s head of digital treasury services and blockchain, told Bloomberg:
“We believe that a lot of securities over time, in five to 20 years, will increasingly become digital or get tokenized.”
The trials for the JPM coin are set to begin on the assumption that regulatory approval will eventually be granted, according to Bloomberg. Acknowledging that there are likely to be many hurdles in the path to digital currency adoption, Farooq added:
“The technology is very good, but it takes time in terms of licensing and approval. It must be explained.”
How It Will Work
JPM Coin will essentially function as a stablecoin collateralized with fiat which can be transferred through a certified distributed ledger. The recipient can later exchange the tokens for cash from JPMorgan.
The digital currency was initially introduced in February 2019, where it ran on top of Quorum, a private blockchain developed on top of the Ethereum network. It is pegged to the U.S. dollar and uses the bank’s blockchain platform, but is expected to be extended to other fiat currencies in due course.
JPMorgan has been developing JPM Coin to enable institutional clients to transfer payments instantly. For bond transactions, JPM Coin would allow dealers to deliver the securities in exchange for cash promptly. The buyer first purchases JPM Coins and deposits them in their JPMorgan bank account, while tokens represent the seller’s bonds. Computer programs on the bank’s private blockchain will then finalize the transaction.
Potential to Be a Game Changer
Traders in Europe, the U.S. and Japan have already shown interest in the digital currency, according to Farooq. This is likely because they recognize the potential it brings in speeding up trading settlements, especially bond transactions.
For example, it currently takes a seller of Japanese government bonds two days to electronically transfer them to the buyer in exchange for cash. With JPM Coin, this time period will likely be shortened significantly.
According to Farook, JPMorgan will possibly commence pilot testing JPM Coin with a few clients to see how efficiently the platform works. The trials could take place by the end of the year if relevant regulators approve it.