Proving the adage “don’t trust a bank”, JP Morgan has done a U-turn and created what is being called the first cryptocurrency created and backed by a US bank.
JP Morgan has named the cryptocurrency “JPM Coin” (full marks for creativity) and claims it is designed to make instantaneous payments using blockchain technology.
The JPM Coin, just like any other cryptocurrency is not going to be a “legal tender” instead it just represents the US Dollars held in a designated account. Currently, a single JPM Coin represents one US Dollar with possibly other currencies being added in future.
A holder of JPM Coins can redeem it at a JP Morgan bank for one US Dollar per coin.
The JPM coin works by assigning a coin to each dollar held in every accountholder’s account. This information is stored on a distributed ledger, when a transaction occurs it is recorded on the distributed ledger, verified on the blockchain and added to the transferee’s account.
Is it really a cryptocurrency?
Some cryptocurrency experts though are claiming that the coin is not a “true cryptocurrency” but just a digital representation that is built on the blockchain, and one expert calling it “somebody scribbling money on a blockchain version of
JPM Coin is nothing but somebody scribbling money on a blockchain version of paper.
In a sense, JPM Coin seems to be just a digital token that represents real money, however, the fact it is built on the blockchain technology means technically it is a cryptocurrency. However, unlike Bitcoin, it is controlled centrally and the value of a coin is not a representation of market and transactions but is fixed by JP Morgan.
JP Morgan pulling a quick one?
While JP Morgan’s CEO, Jamie Dimon, has heavily criticised Bitcoin and cryptocurrencies in general, the issuance of JPM Coin isn’t a surprise to most with rumours floating around for over a year.
While the firm maintains that they are supportive of cryptocurrencies as long as they are properly controlled and regulated, most activists believe that dislike stems from the fact that cryptocurrencies are essentially a competitor to the traditional business of the banks.
A prototype that will need approval from regulators
JP Morgan states that the JPM Coin currently is a prototype and is being tested across a subset of its client. As the program expands, JP Morgan intends to approach the regulators for approval.
The JPM Coins are designed to be used only by corporate client’s of JP Morgan and not individual customers.
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