JPM Coin, the dollar-backed cryptocurrency introduced a few weeks ago by the financial giant, JP Morgan, will only have a “minimal impact,” suggests Binance Research. The statement comes after many in the cryptocurrency community questioned the possible impact of the new coin on the stablecoin and XRP market.
In a detailed analysis done by the research wing of the cryptocurrency exchange, Binance, the JPM Coin was compared to the fiat currency-backed stablecoin market and the Ripple centralized cryptocurrency, XRP.
The ‘BankCoin,’ as many are calling it, is floated on a private blockchain. JP Morgan has been developing use cases for its Ethereum like the private and permissioned blockchain technology, named Quorum, developed in partnership with EthLab, an Ethereum startup.
Stablecoins played an integral part in addressing the cryptocurrency market’s volatility problem since Tether, the top-stablecoin, came to be in 2014. Due to the varied nature of stablecoins’ emergence, the research piece described JPM Coin as,
“JPM Coin represents the first prototype of a stablecoin created by a traditional financial institution.”
The analysis highlighted that JPM Coin seemed to be the “precursor of a third generation of stablecoins,” due to it being operated on a private blockchain within a financial institution for settlement purposes. Binance Research further suggested that the entire business model of the stablecoin market will be shifted from a hedging tool to one that addresses business problems. In JP Morgan’s case, the JPM coin would assist in client transactions and settlement functions.
JPM Coin and other coins that will be issued by large financial banks will primarily cater to institutional investors and hence, Binance’s analysis suggested that JPM coin will have “minimal impact” on the stablecoins on a public network.
The research stated,
“Large banks and financial institutions such as J.P. Morgan have a distinct set of advantages in issuing fiat-collateralized stablecoins, but these offerings will not displace liquid, publicly traded stablecoins in the near-term given their closed ecosystems built on private blockchains.”
The analysis further suggested that XRP was the “mediator currency” between fiat, cryptocurrencies, and other trust products like commodities, miles etc. XRP could interact with networks on a closed blockchain like the JPM Coin to bridge the gap between the open and the closed.
The report concluded,
“While there is currently no direct overlap on the functionality of the two initiatives, future developments on the reach of JPM Coin outside of its existing closed network will determine to what degree Ripple and JPM Coin will compete.”
However, JPM coin’s application may not be solely with JP Morgan’s clientele, with their CEO, Jamie Dimon, suggesting that the JPM Coin could be used in retail payments as well.
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