US investment bank JP Morgan has created a cryptocurrency to help settle payments between clients in its wholesale payments business.
JPM Coin is the first digital currency to be backed by a major US bank. The blockchain-based cryptocurrency has been used successfully to move money between the bank and a client account.
JP Morgan says it sees potential in using digital coins to reduce risk and enable instant and secure transfers.
JP Morgan’s chief executive Jamie Dimon has publicly slammed Bitcoin – the first cryptocurrency in existence – on several occasions, but the bank says it has always “believed in the potential of blockchain technology”.
“We are supportive of cryptocurrencies as long as they are properly controlled and regulated,” Umar Farooq, JP Morgan’s head of Digital Treasury Services and Blockchain, wrote in an online Q&A page.
Can anyone use JPM Coin?
JPM Coin is not for retail customers – it will be used internally by JP Morgan to enable the instantaneous transfer of payments between institutional accounts.
When a JP Morgan client deposits money into an account, the money is converted into an equivalent number of JPM Coins, so $1m equals one million JPM coins.
The client can then use the coins to perform transactions over the bank’s blockchain network Quorum with other clients, for example, money movement or payments in security transactions.
Once the transactions have been performed, holders of JPM Coins can redeem them for US dollars from the bank.
JP Morgan’s Umar Farooq told BBC that JP Morgan is using blockchain technology because of the improvements in speeds and security that the technology offers.
It is because of the privacy that blockchain technology enables, the bank envisions having a network whereby clients, such as large banks, can move coins amongst themselves on the network, however, the transactions will not be visible to all the employees of the bank.
However, the bank stressed that all information required by regulators will continue to be tracked.
Clients will only be able to use the blockchain network if they have been approved by regulators and have passed money laundering checks.
“There is a possibility in the future of a blockchain that is private, except from the regulator,” said Mr Farooq.
“There are various ways to make the regulatory regimes across the world stronger over time.”
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