JPMorgan To Introduce First US Cryptocurrency Called ‘JPM Coin’

J.P. Morgan Chase & Co., the largest bank in the U.S., will roll-out the "JPM Coin," the first U.S. bank-backed cryptocurrency in a move to transform the payments business.

This new cryptocurrency, however, will be tied to the U.S. dollar, making it what is called a “stable coin.” JPMorgan clarified this cryptocurrency is "currently a prototype,” and represents the first real-world use of a digital coin by a major U.S. bank.

JPMorgan said it successfully tested the digital cryptocurrency this month. JPM Coin is based on the blockchain technology made famous by bitcoin, and was developed to enable the "instantaneous transfer of payments between institutional accounts."

JPMorgan said each JPM Coin has a value equivalent to US$1.00.

"When one client sends money to another over the blockchain, JPM Coins are transferred and instantaneously redeemed for the equivalent amount of U.S. dollars, reducing the typical settlement time," said Umar Farooq, JPMorgan head of Digital Treasury Services and Blockchain.

The bank said its JPM Coin will later be extended to other major currencies such as the Euro.

JPMorgan pointed out that only a tiny fraction of payments will initially be transmitted using JPM Coin.

"We have always believed in the potential of blockchain technology and we are supportive of cryptocurrencies as long as they are properly controlled and regulated,” said a statement from JPMorgan.

Analysts said JPMorgan is preparing for a future where parts of the essential foundation of global capitalism will move to the blockchain, which was made famous by its first application, Bitcoin. For this future to occur, the bank will need a way to transfer money at lightning-fast speed rather than relying on dated technology like wire transfers.

"So anything that currently exists in the world, as that moves onto the blockchain, this would be the payment leg for that transaction," said Farooq. "The applications are frankly quite endless; anything where you have a distributed ledger which involves corporations or institutions can use this."

The international banking industry has mostly shunned the cryptocurrency asset class as too risky. Ironically, JPMorgan and two other banks banned the purchase of bitcoins by credit card customers. Goldman Sachs shelved plans to create a bitcoin trading desk after exploring the idea.

Farooq said there are three early applications for JPM Coin. The first is for international payments for large corporate clients.

The second is for securities transactions. The third use will be for huge corporations that use JPMorgan's treasury services business to replace the dollars they hold in subsidiaries across the world.