JPMorgan Chase is gearing up to test its new digital currency, JPM Coin. The bank says it plans to start trials for several corporate customers who will be able to use the coin for inter-company remittances, bonds and commodities transactions, reports Bloomberg Japan.
Umar Farooq, head of digital treasury services and blockchain at JPMorgan, says customers in Europe, the US and Japan, among other countries, are interested in utilizing the digital currency to speed up transactions while lowering costs.
“The technology is very good, but it takes time in terms of licensing and approval.”
By backing securities, JPM Coin is designed to leverage blockchain technology that powers “instant” delivery, outperforming current infrastructure that can take a day to settle government bond transactions, even among domestic companies, and expose a party to the risk of an unfulfilled contract due to a counterparty’s bankruptcy.
As more tech companies and big banks explore blockchain technology and the issuance of their own digital tokens, cryptocurrency innovators point out that these emerging corporate payment rails are closed, centralized systems. Like Facebook, JPM Coin will operate on a permissioned blockchain subject to regulators and will only be available to customers on its platforms.
Cryptocurrencies such as Bitcoin and Litecoin, by contrast, are configured to power an open global financial system that is decentralized and not under the jurisdiction of any one country or government. Bitcoin transactions persist with or without the consent of governments, as the network was originally designed to resist censorship and any centralized authority.
JPM Coin runs on top of Quorum, an open source software project built on Ethereum’s blockchain technology. It has additional features geared specifically for large enterprises requiring scalability, security and a robust privacy layer. Functionally, Quorum facilitates a private cryptocurrency for clients.
JPMorgan has been rebuilding and updating Quorum over the past several months. According to Oli Harris, JPM’s head of Quorum and crypto-assets strategy, Quorum underpins an entire ecosystem for JPMorgan in the digital economy space, spawning a number of potential uses cases.
In an interview with Coindesk, Harris says,
“It’s open source software, available on Github and maintained by JPMorgan on behalf of everyone using Quorum. The more users of Quorum, the better it is for everyone, because we can help with standardization and creating even more robust tech suite.”
“If you think through JPM Coin as the ability to tokenize fiat currency, with the support and all the discipline and rigor and legal and compliance behind one of the world’s largest banks, I think you can see us using JPM Coin in certain use cases.”
“I think Dromaius [a debt issuance platform on Quorum] is a good one. So if you are doing delivery versus payment, i.e. you issue the debt on the blockchain and then you also exchange the cash on the same chain, then you are just getting further benefits of the blockchain technology, because you can actually do things on the same chain, and you don’t need to settle the asset in the traditional rails.”
JPM Coin trials are expected to launch by the end of 2019 with selected clients, pending regulatory approval.