Last Updated: 23 January 2021
The coins can be used for making payments, and if the client decides to cash out, their coins will be “burned.” The announcement is important for the crypto world, as this is the first case of a major bank creating its own crypto-like asset.
The coin is being developed on Ethereum’s private fork known as the Quorum blockchain. In fact, JP Morgan’s team of developers has been working on the blockchain for over two years, starting back in 2016.
It is believed that the coin will end up being interoperable with other blockchains, although, for the initial period, the coin will only be used for limited payment trials. During this period, the coin will be used for facilitating large cross-border payments, secure transactions, and it will try to replace the USD in the firm’s treasury services operations, according to the blockchain head, Umar Farooq.
Farooq sees a lot of potential in DLT, stating that the potential applications appear to be endless. According to him, pretty much every big corporation collaborates with JP Morgan, as well as banks around the world, which indicates that he has high hopes for the project.
Is JPM Coin a cryptocurrency?
Since the announcement of the coin, the mainstream media apparently had a different view on the nature of coins than the crypto experts. The biggest confusion comes due to attempts to deduce the coin’s nature, and while the media calls it a cryptocurrency, experts disagree, claiming that it is not one.
There are several differences between a cryptocurrency and JPM Coin, starting from their blockchains. Typically, blockchains are public and open to everyone, while JPM Coin is being developed on a private, permissioned, and closed network. This is a detail that changes everything, as analysts around the world deny JPM Coin’s cryptocurrency status. According to them, cryptos are permissionless and open, and anyone can get them without the need for permission.
Another issue that analysts are pointing out is the value proposition of the project due to the fact that it will not offer advantages of a regular cryptocurrency. While it will serve as a stablecoin in a way, it will be limited to JP Morgan, meaning that its usefulness will be a lot more limited.
Is JPM Coin a threat to Ripple’s dominance?
Another question that needs answering is whether JPM Coin will pose a threat to XRP. So far, Ripple has partnered with numerous banks around the world, all of which have recognized the superiority of Ripple’s payment products such as xCurrent and xRapid. These products allow banks to settle any transaction instantly, and at a lower price, which is why many of them opted to collaborate with the firm.
However, the announcement of JPM Coin might affect Ripple’s dominance, as well as XRP’s usefulness. JP Morgan has a wide reach in the world of finances, which is already a huge advantage over Ripple, as many of the banks and financial institutions might feel more comfortable working with JP Morgan than with Ripple.
In addition, other projects similar to JPM Coin are appearing as well, adding competition to Ripple. SWIFT, for example, recently announced that it is linking R3 project Corda to its GPI (Global Payments Innovation) framework. In other words, this will allow SWIFT customers to easily send international payments through the use of blockchain technology.
While this does not mean that Ripple is out of the game, the company will likely find itself surrounded by competition in the following months.