JPMorgan Chase successfully tested a cryptocurrency it plans to use in trials for clients of its wholesale-payments business.
Dubbed JPM Coin, it’s based on blockchain technology, a decentralized public ledger of cryptocurrency transactions that’s seen as a way to track transactions without central record-keeping, the bank said Thursday in a presentation on its website.
"We successfully tested the movement of money between a client account and a JPMorgan account using the new technology," Umar Farooq, head of digital treasury services and blockchain, said in the presentation. "We believe that JPM Coin can yield significant benefits for blockchain applications by reducing clients’ counterparty and settlement risk, decreasing capital requirements and enabling instant value transfer."
Japanese lenders including Mitsubishi UFJ Financial Group started working on initiatives such as the MUFG Coin as early as 2016. JPMorgan’s effort could be seen as an endorsement by Wall Street of the technology that spawned Bitcoin a decade ago. It also suggests the biggest banks are moving away from the idea that distributed-ledger technology has benefits but digital currencies are nothing more than vehicles for money laundering.
"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."
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.
CNBC reported the launch of JPM Coin earlier Thursday.
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 actually 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.