Cryptocurrency critic JP Morgan first US bank to introduce dollar-backed virtual currency

When one thinks of large financial institutions that would back volatile assets like cryptocurrencies, JP Morgan does not immediately spring to mind. However, the large-scale financial institution has defied all odds and is set to launch the first cryptocurrency backed by an American bank.

JP Morgan is set to launch the “JPM Coin,” a native token that will be used to settle payments with the banks’ clients. The bank will launch trials in the next few months implementing this payment technology to gauge its long-term feasibility.

The financial institution is gearing up for a world dominated by blockchain technology, the underlying powerhouse of the decentralized currency world. As a precursor to the same, JP Morgan will infuse a crypto-like system for their payment transfer, as traditional wire payments seem to be causing delays, and falling out of prominence.

Despite the negative stance taken by JP Morgan against the cryptocurrency realm, this test by the sixth largest bank in the world by total assets is the first banking-application of cryptocurrencies. The overarching industry has considered the industry as too volatile, and have introduced facilitating services like custody solutions instead.

Umar Farooq, head of JP Morgan’s blockchain projects said:

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

He added that the JPM Coin will be pushed on as a preferred payment option on internet-connected devices if the underlying blockchain for the same emerges within the near future.

The JPM Coin will be reserved for the high-profile clients that are under JP Morgan, who have undergone several rounds of regulatory checks, and hence retail investors, who have long dominated the cryptocurrency field, will not get a chance to trade the coveted JPM Coin.

Furthermore, the JMP Coin will resemble tradition stablecoins, like Tether [USDT], the USD Coin [USDC], as being backed one-for-one by the US Dollar. The clients will have to deposit their fiat currency in the bank, following which the native token will be issued, which can be used for payment purposes. After the deal has been completed, the bank will destroy the remaining tokens and will return the dollars left.

JP Morgan is very hopeful of this latest development, especially given its early move into the field and its large-scale financial backing. Umar Farooq said:

“Pretty much every big corporation is our client, and most of the major banks in the world are, too.”

Farooq, further highlighted the applications of the JPM coin, dividing it into the categories of payments, settlement, and treasury services. The primary use will be for cross-border payment among large clients, replacing the wire transfer system. Large scale institutional investors can use the bank’s cryptocurrency for immediate settlements in security transactions. And finally, JP Morgan can replace held dollars in subsidiaries using their token.

The JP Morgan executive added:

“Is there a way to ensure that a subsidiary can represent cash on the balance sheet without having to actually wire it to the unit? That way, they can consolidate their money and probably get better rates for it.”

Jamie Dimon, the CEO of JP Morgan has not been the best of friends with the cryptocurrency industry, calling Bitcoin [BTC] a “scam,” adding that he had “no interest,” in the digital asset. He even called for a regulatory government shutdown of cryptos, deeming them unable to be controlled. However, blockchain has always caught his good side, describing the underlying technology as “real,” while continuing his attack on virtual currencies.

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