JPMorgan to Use Digital Coin to Accelerate Corporate Payments
The biggest U.S. bank said it developed a prototype digital coin based on blockchain technology.
February 15, 2019 at 09:21 AM
4 minute read
Marketing TechnologyThe original version of this story was published on Law.com
JPMorgan Chase & Co. is turning to crypto to modernize one of its most central businesses.
The biggest U.S. bank said it developed a prototype digital coin that it plans to use to speed up payments between corporate customers, according to a statement Thursday. The token, dubbed JPM Coin, is based on blockchain technology, a decentralized public ledger of transactions that offers more speed because it doesn't rely on a central record keeper.
"Many of our clients move money in different ways and they're looking for a more real-time way to move value around," Umar Farooq, head of digital treasury services and blockchain, said in an interview.
JPMorgan moves more than $5 trillion in wholesale payments each day, so even a nascent experiment from the banking giant is poised to make waves in the cryptocurrency world. While some experts questioned the broader impact of a dollar-pegged coin available only to JPMorgan clients, others said the bank's involvement lends legitimacy to an area that's been rocked by volatility and scandal.
The bank started developing JPM Coin about a year ago in response to client demand and plans to start testing out possible uses with a small number of its institutional customers in the coming months, Farooq said. He declined to name the interested companies.
Greater Efficiency
SWIFT, the air-traffic control system for sending money around the world, has been working on a plan to make overseas transfers more efficient though a campaign known as the global payments innovation initiative. But banks still sometimes run into trouble clearing cross-border payments in real time, Farooq said. JPM Coin could eliminate that problem by allowing instantaneous value transfer, he said.
Japanese lenders including Mitsubishi UFJ Financial Group started working on initiatives such as the MUFG Coin as early as 2016.
New York-based Signature Bank rolled out a digital coin for real-time payments earlier this year, and scores of its institutional clients have started using it to send money to each other, according to Chief Executive Officer Joseph DePaolo. The bank, which had about $46 billion in assets as of Sept. 30, has seen daily volume in the tens of millions of dollars since the coin's debut, he said.
Compared with JPM Coin, "there's no difference other than we're up and running and we already have regulatory approval," DePaolo said. "They're trying to do the same thing we are."
Dollar Equivalency
JPMorgan is the first of the major U.S. banks to publicly introduce its own coin.
The coin has some differences from a traditional cryptocurrency, according to the presentation. Cryptocurrencies use public, open-access blockchain technology and their value is intrinsic to the coin. A JPM Coin always has a value equivalent to one U.S. dollar and uses JPMorgan's private blockchain.
"JPMorgan is taking a significant step here,'' said Adam Grimsley, a former BlackRock Inc. fixed-income investor who co-founded London-based crypto hedge fund Prime Factor Capital. "The first bullet in any war is always the most important, and it looks like this could be the first move in a broader adoption of blockchain and digital currencies by large institutions."
Gregory Klumov, chief executive officer and founder of blockchain company Stasis in Malta, downplayed the scale of the project.
'Bit Faster'
"They're just taking an existing internal process and making it a little bit faster," Klumov said. "It doesn't have any of the long-term, disruptive potential of public blockchains."
JPMorgan previously developed the Interbank Information Network, which is based on the ethereum blockchain. IIN, which has about 157 banks in its network from all parts of the globe, is intended to address some of the challenges of interbank information-sharing and to help payments reach beneficiaries sooner. JPM Coin is aimed at transferring value rather than information, according to the bank.
Read the views of JPMorgan's head of research on crypto's future
The most famous use of blockchain — cryptocurrencies — has been stumbling. Bitcoin is down more than 80 percent from its highs in December 2017, and, according to JPMorgan calculations, has recently been trading below the average cost it takes to mine.
JPMorgan Chief Executive Officer Jamie Dimon famously called Bitcoin a " fraud" in 2017, though he's repeatedly said he sees many ways the bank could use blockchain technology.
The bank in January revamped its treasury-services business, combining teams from the consumer and corporate bank to create a group called wholesale payments that will deal in cash management, payment solutions and merchant services. It's led by Takis Georgakopoulos.
NOT FOR REPRINT
© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.
You Might Like
View AllBrave New World: How Younger Advisors See Tech Changing the Business
Trending Stories
- 1King & Spalding E-Discovery Director Jumps to Nebraska Women-Owned Firm
- 2Nation's Largest Utility Parts Ways With CLO Who Helped It Navigate Bribery Scandal
- 3Advocates Renew Campaign for Immigrant Right to Counsel in New York
- 4From ‘Unregulated’ to ‘A Matter of Great Concern’: PFAS Regulation under Biden
- 5Public Interest Lawyers in NY Fear Rollback of Federal Loan Assistance in '25, Ask Gov. to Add $4M to State Program
Who Got The Work
Michael G. Bongiorno, Andrew Scott Dulberg and Elizabeth E. Driscoll from Wilmer Cutler Pickering Hale and Dorr have stepped in to represent Symbotic Inc., an A.I.-enabled technology platform that focuses on increasing supply chain efficiency, and other defendants in a pending shareholder derivative lawsuit. The case, filed Oct. 2 in Massachusetts District Court by the Brown Law Firm on behalf of Stephen Austen, accuses certain officers and directors of misleading investors in regard to Symbotic's potential for margin growth by failing to disclose that the company was not equipped to timely deploy its systems or manage expenses through project delays. The case, assigned to U.S. District Judge Nathaniel M. Gorton, is 1:24-cv-12522, Austen v. Cohen et al.
Who Got The Work
Edmund Polubinski and Marie Killmond of Davis Polk & Wardwell have entered appearances for data platform software development company MongoDB and other defendants in a pending shareholder derivative lawsuit. The action, filed Oct. 7 in New York Southern District Court by the Brown Law Firm, accuses the company's directors and/or officers of falsely expressing confidence in the company’s restructuring of its sales incentive plan and downplaying the severity of decreases in its upfront commitments. The case is 1:24-cv-07594, Roy v. Ittycheria et al.
Who Got The Work
Amy O. Bruchs and Kurt F. Ellison of Michael Best & Friedrich have entered appearances for Epic Systems Corp. in a pending employment discrimination lawsuit. The suit was filed Sept. 7 in Wisconsin Western District Court by Levine Eisberner LLC and Siri & Glimstad on behalf of a project manager who claims that he was wrongfully terminated after applying for a religious exemption to the defendant's COVID-19 vaccine mandate. The case, assigned to U.S. Magistrate Judge Anita Marie Boor, is 3:24-cv-00630, Secker, Nathan v. Epic Systems Corporation.
Who Got The Work
David X. Sullivan, Thomas J. Finn and Gregory A. Hall from McCarter & English have entered appearances for Sunrun Installation Services in a pending civil rights lawsuit. The complaint was filed Sept. 4 in Connecticut District Court by attorney Robert M. Berke on behalf of former employee George Edward Steins, who was arrested and charged with employing an unregistered home improvement salesperson. The complaint alleges that had Sunrun informed the Connecticut Department of Consumer Protection that the plaintiff's employment had ended in 2017 and that he no longer held Sunrun's home improvement contractor license, he would not have been hit with charges, which were dismissed in May 2024. The case, assigned to U.S. District Judge Jeffrey A. Meyer, is 3:24-cv-01423, Steins v. Sunrun, Inc. et al.
Who Got The Work
Greenberg Traurig shareholder Joshua L. Raskin has entered an appearance for boohoo.com UK Ltd. in a pending patent infringement lawsuit. The suit, filed Sept. 3 in Texas Eastern District Court by Rozier Hardt McDonough on behalf of Alto Dynamics, asserts five patents related to an online shopping platform. The case, assigned to U.S. District Judge Rodney Gilstrap, is 2:24-cv-00719, Alto Dynamics, LLC v. boohoo.com UK Limited.
Featured Firms
Law Offices of Gary Martin Hays & Associates, P.C.
(470) 294-1674
Law Offices of Mark E. Salomone
(857) 444-6468
Smith & Hassler
(713) 739-1250