J.P. Morgan Creates Digital Coin for Payments
J.P. Morgan has become the first U.S. bank to create and successfully test a digital coin representing a fiat currency. The JPM Coin is based on blockchain-based technology enabling the instantaneous transfer of payments between institutional accounts.
JPM Coin is a digital coin designed to make instantaneous payments using blockchain technology. Exchanging value, such as money, between different parties over a blockchain requires a digital currency, which is why the bank created the JPM Coin. It is a digital coin representing US dollars held in designated accounts at JPMorgan Chase. When one client sends money to another over the blockchain, JPM Coins are transferred and instantaneously redeemed for the equivalent amount of US dollars, reducing the typical settlement time.
In terms of how the process works, in step 1, a J.P. Morgan client commits deposits to a designated account and receives an equivalent number of JPM Coins. In step 2, these JPM Coins are used for transactions over a blockchain network with other J.P. Morgan clients (e.g., money movement, payments in securities transactions). Finally in step 3, holders of JPM Coins redeem them for US dollars at J.P. Morgan.
JPM Coin is currently a prototype. As the bank moves towards production it says it will actively engage regulators to explain its design and solicit their feedback and any necessary approvals. The JPM Coin will be issued on Quorum Blockchain and subsequently extended to other platforms. JPM Coin will be operable on all standard blockchain networks. The coin is currently a prototype that will be tested with a small number of J.P. Morgan’s institutional clients, with plans to expand the pilot programme later this year. It is currently designed for business-to-business money movement flows.