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JP Morgan Chase Bank is Going All In on Blockchain as JPM Coin Looks to Be Just the Start
About a year and a half back, JP Morgan CEO, Jamie Dimon had criticized Bitcoin by calling it a scam while during that time JPM Securities was one of the largest buyers of a Bitcoin-related ETP traded in Scandinavia.
Well, it’s not all as in the meantime, JP Morgan surpassed all other investment banking giants viz. Citigroup, Goldman Sachs among others to become the market leader in blockchain adoption.
Earlier this year we reported the launch of ‘JPM Coin’ by JP Morgan, a so-called stablecoin that is to be used to facilitate the transactions and trades for its large corporate clients.
The launch of JPM Coin has been popularly attributed as the Ripple killer given the fact that the market segments of both the organization’ that is cross border payment settlements overlap. However, Ripple CEO and XRP supporters have rebuffed any concerns as they say no major banks are going to use each other’s digital asset and they would still require that one asset say XRP to make it work among themselves.
Though it is still early to say how ‘JPM Coin’ will turn out, the bank is going all in blockchain adoption.
A Blockchain-based Decentralized Alternative To SWIFT
Now, the bank is also taking a lead role in building the Interbank Information Network (IIN), a little-known blockchain project that about 75 banks had already joined last year. With this, the project aims to be a blockchain-based decentralized alternative to SWIFT.
SWIFT might be the popular and traditional banking software used all over the world, but it is increasingly facing competition not only from the Ripple but now also from IIN.
With this technology, JPM hopes to cut down the failure rate of international transactions along with streamlining the compliance. This will further for intensifying the competition as by building out INN, JPM hopes to make its international payments business for corporate clients to be better equipped to fend off the challenges from Ripple and TransferWise.
This service already has more than 220 banks signed up that allows data sharing on payments over the network so that errors can be resolved quickly. From sanctions screening, the use case has turned to the point of settlement that would remove the potential of transactions being rejected days later because of some error in address, sort code or account number.
JPM is working fast on its blockchain game as it will go live in the third quarter for both domestic and international payments, though it is expected to be more useful for international payments, where error rates are higher.
IIN already has a number of banks join the system and ready to be pushed out this year itself and with JPM’s help, it is further building a ‘sandbox’ of tools to encourage more banks to join in. This sandbox will allow the developers to build more apps on top of the protocol.
JP Morgan's Ethereum Quorum has 185 Banks Signed Up JPM Coin Stablecoin: Ripple Replacement?
According to the JP Morgan investor day slide, it has already got over 185 banks that have signed a Letter of Intent (LOI) to use JPM Coin,
“185+ banks with signed LOIs: on target to be the largest blockchain-based banking information network.”
It further mentions that it will be issued on Quorum Blockchain, but
“can be used on other blockchain platforms,” as well. But how that compatibility will work is very much unknown at this point with a possibility as @Eric Conner says, “it'll interop with the public Ethereum chain.”
“As of April 2019, JPMC will be the only bank in the world with all three (USD / GBP / EUR) Real-Time Payments capabilities.”
Initially, the stablecoin will facilitate payments in US Dollar but plans to extend to other major currencies in the future.
As Jamie Dimon, the Chief Executive Officer of one of the major banks of US, JPMorgan Chase recently revealed at the annual investors day, JPM Coin would also be used by the consumers, “JPMorgan Coin could be internal, could be commercial, it could one day be consumer,” however, the website of the bank says otherwise.
The new digital coin of JPMorgan Chase, JPM Coin is not really a cryptocurrency, as we had established previously. However, it has yet again resurfaced the question of what does it actually mean for Ripple which already has over 200 banks in partnership.
As @Barry Baddi points out, “Ya it’s like a race between a stealth jet going and a toy car with a one mile head start,” as JPMorgan Chase is the largest bank in the United States, and is ranked as the sixth largest bank in the world by total assets of $2.534 trillion as of 2018 by S&P Global.
But XRP community is unperturbed as popular XRP enthusiast Dr. T states,
“Paypal is great when everyone is using Paypal. But everyone is NOT using PayPal. And Paypal users are often at the mercy of Paypal. JPM Coin will be the same to *their* customers. Competing Banks like MUFG also have their Coin. XRP is a perfect bridge for these IOU liabilities!”
It’s too early to say how JPM Coin will perform and if it will have any effect on the crypto market, but the involvement of banking giant into this space, though through its so-called stablecoin that is, it brought the mainstream attention to the crypto space.
Is JPMorgan Chase Bank's JPM Coin a Friend or Foe to the Cryptocurrency Industry?
Bitcoin started in 2009, and they have long held their reign as the top cryptocurrency by market cap. Without Bitcoin, the cryptocurrency movement would still be an idea, and blockchain technology would not be what it is today.
Though many altcoins have tried to compete, all have failed, and Bitcoin has been the biggest indicator of the market. The way it has defined cryptocurrency is nothing short than the way Bandaid has become the household name of adhesive bandages.
CEO Jamie Dimon of JP Morgan Chase has frequently criticized and torn down Bitcoin, calling it a fraud and has even insulted much of the crypto market all together. Blockchain technology, however, has constantly been a source of interest for him, and he recently announced that he would be bringing his own blockchain product to the table.
The launch is a shock to anyone who knows Dimon’s name in the crypto community, but the JPM coin will not be referred to as “cryptocurrency” during this article. The actual definition of cryptocurrency is broad and constantly expanding. On the Everipedia website, cryptocurrency is defined as:
“a digital asset designed to work as a medium of exchange using cryptography to secure the transactions, to control the creation of additional units, and to verify the transfer of assets.”
Mining is not actually included in this definitely. Basically, that definition would allow any token to be considered a cryptocurrency.
However, cryptocurrency’s definition here does not really cover it accurately. In comparison with the dollar, Bitcoin is basically digital cash, which was its intention in the original whitepaper from Satoshi. While traditional bank accounts allow transactions to be pulled (which is the root of most fraud), the same is not true of crypto.
With cash, whoever holds it is the owner, just like with fiat. Bitcoin allows users to be their own bank with private keys, while a bank can just lose funds without explanation and it still impacts the customers. A hardware wallet makes crypto holdings almost untouchable.
Bitcoin is also decentralized, leaving no one to control it. While there are some issues in the altcoins that are presently in circulation, especially for altcoins that have companies with a majority stake, the core intention is to have a digital asset controlled by the people who “own” it. There is no account representative or middleman; as long as a Bitcoin transaction meets the consensus rules, it is attached to the blockchain and remains immutable.
Censorship resistance is a core value of Bitcoin and the blockchain, drastically setting it apart from modern banking. A crypto transaction is always posted on the blockchain, and the transactions cannot be deleted, making blockchain honest where a bank’s list of transactions could be altered. Basically, the author of a recent CCN article, which discusses this very issue, put it best:
“If your token doesn’t have the above properties – immutable, cash-like, and resistant to the petty despots of the world – then it is not a cryptocurrency.”
That being said, JPM Coin cannot be considered a cryptocurrency. It is, as best, a bank coin, and a bank coin is neither competition against or equal to Bitcoin in the slightest.
Now, more importantly, considering everything about the JPM Coin, it does not make sense to not use Ripple. Ripple’s existing products and crypto asset are basically what JPM Coin is doing. While JPM Coin is nothing like Bitcoin, it is very close to Ripple, which is a little unnerving. Ripple is all software, and software can easily be replicated.
If Ripple was smart in this circumstance, they would have approached or even tried to partner with JP Morgan for this protocol, because the use of a trusted bank has a much bigger threat to Ripple than it does to Bitcoin.
Another possibility is that Ripple could be a segue for JPM Coin to move beyond JP Morgan, but there are many platforms that could do the same. In fact, R3 has been working towards blockchain solutions for large institutions for quite some time.
Ben Walsh, a writer for Barron, introduced the idea that JP Morgan’s new coin will “kill the Bitcoin dream.” He said,
“JP Morgan’s coin rollout also says something about the broader state of technology in the current economy. Tech’s promise is no longer about replacing middlemen. It’s about middlemen using technology to entrench their profitable position.”
The opinion held by CCN is shared by other publications as well, like TheNextWeb. The writer immediately opens their own article by saying that JPM is neither cryptocurrency or stablecoin, even if it is found on a blockchain ledger.
There are plenty of bank tokens in traditional finance, so the writer categorized it as such. The article explains,
“The network powering JPM Coin will be entirely permissioned (private, or if you prefer: centralized), controlled by the bank itself. It will reportedly be available only to its institutional customers that pass JP Morgan‘s Know-Your-Customer measures. That’s really about it.”
They add a small note about Dimon, saying that he is not trying to trick anyone. Instead, they redirect users to true cryptocurrency, rather than the imposter that thinks it can go head-to-head with Bitcoin. TheNextWeb adds,
“It’s quite honest this product is probably not for you, and if you are looking for cryptocurrency, you might want to check out something like Bitcoin or Ethereum.”
Now, regardless of the opinions of crypto media, the JPM Coin is here. There have been many failures and successes as cryptocurrency has evolved through the years. Even if the coin challenges the economy and the traditional market, it will not be included as a cryptocurrency. It simply does not have the golden Bitcoin power.
JP Morgan Chase Bank's Ethereum-Built Quorum Blockchain to Tokenize Gold Bars
American multinational investment bank and financial services company JPMorgan Chase & Co. just announced that their blockchain Quorum will be used to tokenize gold bars.
Quorum is essentially an enterprise-focused version of Ethereum. It is ideal for applications that require high speed and throughput processing of private transactions within a permissioned group of verified participants. It supports both transaction-level privacy and network-wide transparency, customizable to business requirements. Quorum has been created through association with Ethereum Enterprise Alliance.
Through Quorum, interested customers can trade with each other without the requirement of exchanges or other intermediaries. This reduces the overall costs and risks involved when third-parties are associated.
As a matter of fact, Umar Farooq, the head of blockchain initiatives at JP Morgan has stated that the financial giants are a big believer in Ethereum. He thinks that when you tokenize gold or any other commodities, new trading opportunities arises.
“They can track the gold bar from the mine to the endpoint – with the use case being, if you know it’s a socially responsible mine, someone will be willing to pay a higher spread on that gold versus if you don’t know where it comes from. Diamonds is another example.”
Gold will be tokenized so that it can move on DLTs that permits ownership to be fractionalized. This allows high-cost assets to have a broad spectrum of investors. It will help in improving global liquidity management and will also allow companies to trade assets under smart contracts without mediators via atomic swaps.
Farooq also said that some parties were already considering the use of Quorum in various markets, however, he did not disclose any names.
He added: “We are all building private networks but there is a long-term thought process of what happens when you get to a point where you need to do private-public convergence, a connection. At that point, if you are in some ways a derivative of a public platform, it could become easier.”
SWIFT Launches Blockchain Payment Pilot Program to Rival JPMorgan Chase's Interbank Information Network (IIN)
45-year old payment provider Swift just announced the launch of a new payment validation platform. The new platform aims to fight back against rising competition from fintech companies and blockchain-based projects, lowering costs and speeding up financial transactions worldwide.
Swift was founded in 1973 by a conglomerate of American banks. These banks were seeking a way to move money around the world more quickly and easily. Today, Swift is used by 2,500 banks worldwide and processes $200 billion every day.
In recent years, however, Swift has faced increasing competition from a growing number of fintech competitors. Inefficiencies within the Swift ecosystem have left it vulnerable to newer, more efficient payment technologies.
Startups like Revolut and TransferWise, for example, have chipped into Swift’s market share.
Blockchain technology is also posing a threat to Swift. One of the most promising startups from the blockchain space is Interbank Information Network (IIN), a blockchain-based project where banking information is shared on a distributed ledger. To date, more than 130 banks, including JPMorgan Chase and other major names, have signed onto IIN. With IIN, errors and compliance issues can be solved rapidly. With traditional payment systems, these issues can delay payments for weeks.
That’s why Swift wants to innovate. Swift has launched its own validation system to compete with fintech companies and blockchain startups. That validation system is currently going through a pilot, although it could be rolled out to Swift’s 10,000 customers in the near future.
Swift Is Testing A New Payment “Pre-Validation” System
In response to competition, Swift has announced the launch of a pre-validation payment system for banks.
This system is expected to speed up lengthy payment delays. Just like IIT’s system removes costly delays, so too will Swift’s pre-validation system.
With Swift’s new system, banks use an application programming interface (API) to check data from other banks. That data can include bank account numbers, for example, when a payment is initiated. The system checks these bank account numbers, verifies the legitimacy of these numbers, then validates the payment.
To be clear, Swift’s pre-validation system does not involve the use of blockchain; instead, it’s an API interface. There’s no mutually-distributed ledger. The API allows banks to access each other’s data on a bilateral basis. Banks choose to share data with each other.
10% Of Swift Payments Are Delayed Because Of Errors
Payment-related disputes are a significant issue with Swift. According to the Financial Times, approximately 10% of payments on the Swift platform are delayed because of errors.
The new system is expected to considerably reduce the costs banks incur to resolve problematic payments. It also speeds up the payment process for customers.
After adopting this system, banks could be expected to cut prices and compete more effectively with newer fintech startups.
Some analysts believe Swift’s API-based solution could be more viable than IIT’s blockchain solution. One analyst interviewed by the Financial Times believes Swift’s solution is superior because it tackles “exactly the same kind of issues as IIN” but could be rolled out more quickly, allowing Swift to take advantage of “scale and industrialisation” among its 10,000-plus members.
Swift Solves The Payment Problem Without Blockchain
Ultimately, Swift’s new pre-validation system aims to solve payment-related problems just like IIT’s system. However, IIT’s system depends on blockchain technology while Swift’s system depends on an API. The two achieve similar goals but in different ways.
It remains to be seen which system will be more successful in the long run – a blockchain-based system or API. Greater competition within the payments space, however, is good news for consumers.