I Was Asked About J.P. Morgan’s Blockchain-Based “JPM Coin.” I Ruthlessly Expand it to Other Payment Systems
I Was Asked About J.P. Morgan’s Blockchain-Based “JPM Coin.” I Ruthlessly Expand it to Other Payment Systems by Wolf Richter for Wolf Street
Are banks trying to send credit-card-processing fee-gougers Visa, MasterCard et al. the way of Friendster?
The crypto world went into a tizzy when J.P. Morgan announced “JPM Coin.” They thought that the bank had switched sides finally, after CEO Jamie Dimon had blasted cryptocurrencies as “fraud.” Given my own blistering rants about cryptocurrencies – such as Bitcoin Plunges to $3,738; Whole Crypto Scam Melts Down, Hedge Funds Stuck – I was asked what I thought about JPM Coin. And so I expanded my answer to others in the payment-processing industry, and what they may be trying to do to fee-gougers, such as Visa and MasterCard.
Here’s what JPM Coin actually is not – and is.
JPM Coin is not a cryptocurrency. It cannot be “mined.” It cannot be traded. It doesn’t need an exchange or a “wallet” or anything like that. It won’t make anyone suddenly rich or poor. It’s “not money per se,” J.P. Morgan explained.
Instead, it’s a “digital” coin that serves exclusively as a system to “transfer and settle money for clients around the world” via a blockchain network.
It represents US dollars, “held in designated accounts at JPMorgan Chase N.A.” and is “1:1 redeemable in fiat currency held by J.P. Morgan (e.g., US$).”
It’s a prototype to be tested “with a small number of J.P. Morgan’s institutional clients.” The pilot program “is currently designed for business-to-business money movement flows,” and if it works out, the test may be expanded. “We don’t have plans to make this available to individuals at this stage,” J.P. Morgan says.
It was created so that J.P. Morgan could use the blockchain technology for payments. Processing payments over a blockchain “requires a digital currency, so we created the JPM Coin,” J.P. Morgan said.
In other words, there is no cryptocurrency-magic to it. It’s just an instantaneous payment system that works over a blockchain network. You have to have the dollars in your J.P. Morgan account before the transaction. You exchange them into JPM Coins 1:1 and then send those coins to another J.P. Morgan account holder who exchanges the coins back into US dollars 1:1. All within a very short time.