JPMorgan Chase & Co is the largest American Bank, and the sixth largest bank worldwide, with assets of approximately $2.4 Trillion USD. It is also the first (known) US Bank to create it’s own cryptocurrency stable coin, the JPM Coin.
The bank JPMorgan announced plans for their JPM coin last week; however, they are not calling it a cryptocurrency. They are calling it a blockchain technology that is backed by the $USD that is sent on a blockchain to settle payments within their banking system, especially cross-border and for large transactions with large, institutional clients. They go on to state that it has uses beyond this as well, really anything that involves value settlement, for example with securities.
… folks… this sounds a lot like a cryptocurrency stablecoin, possibly with a smart contract layer for securities. But mostly it sounds like JPM coin is a stablecoin. Interestingly, the JPM coin is built on the Ethereum blockchain application, Quorum.
I’ve got a few things to say about the JPM Coin. I realize that this news came out last week, and perhaps this post can be viewed as “late” in the cryptocurrency lightning news world. However, I sat back and listened to all the different opinions on the coin first. I’ve put together what I think to be some good insight on JPM coin and its deeper meaning for the crypto space.
There are a few major takeaways from this post on JPM Coin:
- JPM Coin is like an Intranet
- JPM Coin is akin to gold-backed bank notes from 200-300 years ago… almost, but not quite.
- JPM Coin does not replace XRP and does not challenge XRP
- JPM Coin provides legitimacy to the cryptocurrency industry, in the eyes of Mr Average Joe.
Alright, let’s get started!!
1) JPM Coin is like an Intranet
You all know the Internet. It is public. It’s live. It’s for everyone to use, even scammers and hackers. All together in the beautiful wild west of the Internet.
You all know Intranets right? They are small, protected, fire-walled online communities with restricted access to only network computers. They must be protected by firewalls and an IT team. Usually, they are used by big organizations such as governments, larger corporations (banks, hospitals, law firms, retailers, etc). An Intranet can connect to the Internet but only by approved, secured means such as their own email.
JPM Coin is a stablecoin backed by the US dollar, built on a private blockchain based on Quorum, on Ethereum. The private blockchain nature of the JPM coin is what gives it its Intranet qualities.
2) JPM Coin is similar to gold-backed bank notes from 200-300 years ago
In the 1700s and 1800s private banks held hoards of gold bullion. Gold was the best sound money known to mankind up until that point in time. One of its drawbacks was dividing it into coins and carrying around coinage for commerce. It was cumbersome to carry large quantities or to make very small transactions with it since even small amounts were highly valuable.
Enter the paper bank note. Banks would issue paper money denoting a certain worth that was based on a weight of gold. It was much easier to write down a small value of gold on paper than it was to make tiny fractions of gold bullion/small gold coins. Moreover, it was also easier to carry around a few pieces of paper that could be worth thousands of ounces of gold. I mention this period in my post on A Brief History of Money.
Today, consider the fact that the USD is the reserve currency of the world (and gold is not backing it). To create a private bank coin, JPM coin, that is backed by the USD, the global reserve currency… it is analogous, but not identical to private banks issuing gold-backed bank notes hundreds of years ago.
JPM coin is a USD backed cryptocurrency, just as private bank notes were gold-backed dollars. Interestingly, JPMorgan Chase is such an old bank that some of their early, predecessors that they merged with the mid-1800s did, in fact, issue gold-backed bank notes.
Did the private bank notes last? No… Central banks were created and a national currency was tendered. Do I know what will happen to JPM Coin? Of course not, I cannot predict the future. I will try to come to a conclusion at the end of this post based on all the information here.
3) JPM Coin Does Not Replace XRP and Does Not Challenge XRP
Many in the crypto community, particularly those supporters and investors of XRP were/are worried that the JPM Coin threatens the mission and existence of XRP and Ripple. I can assure you that this is not the case.
I do not work for Ripple, but I understand their mission and their global adoption. XRP is not a stable coin. It is not backed by anything. It is an interledger protocol. The JPM Coin is simply its own private blockchain built on the Ethereum blockchain, back by and representing the $USD.
XRP integrates different protocols/blockchains and acts as a settlement layer. It allows intra-and international value transfer in seconds, peer-to-peer or business-to-business or peer-to-business etc. The RippleNet is a whole user interface for communication of these transactions, but is not necessary for the use of XRP.
Technically speaking the JPM Coin is an IOU for a $USD. Whereas an XRP is simply an XRP, an asset, not an IOU. XRP is open & permissionless, JPM is closed and permissioned. Just as the Internet is better than any intranet, XRP is better than JPM Coin.
JPM Coin does not replace or threaten XRP because they work very differently with different purposes.
4) JPM Coin Provides Legitimacy in the Eyes of Mr Average Joe
JPMorgan Chase and its CEO Jamie Dimon have been known to bash Bitcoin and other cryptocurrencies. I’m not going to go searching for an exact quote, but along the lines of calling Bitcoin a scam, a fad, a loser’s bet. I believe that at one point Dimon actually threatened to fire any employee who was buying Bitcoin. Then, awkwardly, he found out his daughter had bought some Bitcoin.
Anyway, the point is that when the largest bank in America puts down Bitcoin and other cryptocurrencies it really does some damage to the public opinion on Bitcoin and cryptocurrency in general. Despite that Dimon did proclaim publicly that blockchain technology will be very useful. The arrow was already shot, you can’t revoke the spoken word and he already denounced Bitcoin and cryptocurrency publicly.
The crypto community has worked very hard to develop educational tools and to spread the word on cryptocurrency, blockchain, PoW, PoS, PoC, distributed ledgers, decentralization, Bitcoin, Ethereum, XRP, Litecoin etc – taking months and years to build the trust of the public. Then, in a couple interviews, the largest bank of America, with huge public clout and influence, denounced the majority of the movement. That does some damage.
However, the cryptocurrency community kept grinding forward in our work. Kept developing, kept advancing, kept building bridges and interfaces.
Now, JPMorgan announces that they built a cryptocurrency stablecoin… That changes everything.
When the very institute that denounced Bitcoin and other cryptoassets, builds itself a cryptoasset, on the backbone of Ethereum nonetheless… they don’t even need to announce anything else. That action alone speaks decibels louder than Dimon’s previous denouncement.
JPM Coin is proof of JPMorgan surrendering to the cryptocurrency industry. It is an acknowledgement of the vast benefit that a cryptocurrency technology and asset can bring to an organization and a large institution. Despite that JPM Coin is designed in a closed system to be used privately within the bank, its admission is still true.
This change of behaviour grants permission for Mr Average Joe and Ms Average Jill to take a second look at cryptocurrency assets. If their trusted JPMorgan bank is using cryptoassets, then cryptocurrency can’t be all that bad… right? – That is the statement that the average person is interpreting.
Markshire Crypto Conclusion On JPM Coin, the First Real Bank Coin
I think Changpeng Zhao, CEO of Binance, said it very well when he quoted Mahatma Ghandi (although apparently this quote has never really been traced back to Ghandi… but its message is true nonetheless)
“First they ignore you, then they laugh at you, then they fight you, then you win”
CZ Binance (?Ghandi)
I think that we are in the midst/end of the “then they fight you” now and slowly transitioning to the “then you win” – which I think will be defined by the launch of institutional exchanges, and when the average person buys Bitcoin and other cryptocurrencies to hold in their retirement funds.
Regardless, I think that JPM Coin is significant in the entrance of large banks into the crypto industry more deeply and directly. The coin itself is actually not that great. It was expected to be private and permissioned since a bank would not want its inner transactions to be visible on a public distributed ledger. I would presume that the JPM coin will interact with the greater world via XRP and RippleNet and/or via the Ethereum or Bitcoin blockchains. Likely some mix of it all, but most likely on the XRP rails.
In my opinion, DAI is a better option for a stable coin. However, the true purpose of the JPM Coin is for a private blockchain for the company to do its own business on, as a rail to integrate with the greater cryptocurrency financial world.
I would love to know what you, the reader, think about the JPM Coin! Please add a comment in the comment section below!