Jamie Dimon Takes The Plunge, Leads JPMorgan And US Banks Into Cryptocurrency

JP Morgan Chase & Co. JPM has paved a path for big banks to break into cryptocurrency. The markets don’t seem to care.

What Happened

The bank’s stock was unresponsive Thursday morning to reports revealing a new investment in cryptocurrency. “JPM Coin” will be the first digital token provided by a U.S. bank.

The coin will be used for instant wholesale payments transactions. Clients will receive one coin per $1 deposited to use in international payments, securities transactions or JPMorgan’s treasury services for global subsidiaries. Each unit will be destroyed after being cashed in.

In a few months, JPMorgan will launch a trial of the coin for a fraction of its payments. The coin will not be available for retail investors but will be reserved for large institutional clients that have passed regulatory checks.

Why It’s Important

“Cryptocurrency” was a 2017 buzzword — one the financial market dismissed as risky and consumers abandoned after the plunge of pioneer bitcoin. JPMorgan CEO Jamie Dimon had condemned bitcoin as a fraud and banned credit-card consumers from purchasing it, but he had conceded promise in blockchain technology and regulated digital currencies.

The new JPM Coin gives the bank a first-mover advantage to disrupt wholesale payments — a business recording $6 trillion in daily transactions at JPMorgan. The firm’s extensive client base is expected to give the coin a fighting chance.

"Pretty much every big corporation is our client, and most of the major banks in the world are, too," Umar Farooq, head of JPMorgan's blockchain projects, told CNBC. "Even if this was limited to JPM clients at the institutional level, it shouldn't hold us back."

Management sees later opportunity for payments over internet-connected devices.

"Anything that currently exists in the world, as that moves onto the blockchain, this would be the payment leg for that transaction," Farooq said. "The applications are frankly quite endless; anything where you have a distributed ledger which involves corporations or institutions can use this."

Related Links:

Jamie Dimon Slightly Changes Tune On Bitcoin, Says 'The Blockchain Is Real'

Another Potential Bitcoin ETF Effort Emerges

Photo credit: Steve Jurvetson, via Wikimedia Commons