Will this lead to widespread adoption of cryptocurrencies?
Last week JP Morgan unveiled their plans for a proprietary coin that would help institutions with cross-border payments. While Jamie Dimon has questioned Bitcoin's legitimacy in the past, it seems he is taking steps to make cryptocurrencies more attractive to his risk-averse corporate customers. JPM Coin, will be controlled by the bank and each coin will be backed by a dollar in JP Morgan accounts. This gives the coin a more stable value and helps avoid wild price volatility. We at Hehmeyer Trading + Investments asked a few of our industry friends what they thought of JP Morgan's most recent move.
Nicole Kalajian from Stradley Ronon thinks this is a big first step from an unlikely player.
"It’s fascinating that J.P. Morgan’s Jamie Dimon previously bashed Bitcoin as a fraud, but now J.P. Morgan is the first US bank to create a bank-backed cryptocurrency," she said. "This is a big first step in transforming customer settlements, and for the use of cryptocurrencies by banks in general. It will be interesting to see if other banks follow suit.
Kevin Darby from Blue Trading Systems believes they will.
"This is a clever circumvention of existing payment networks and perhaps a grab for a larger share of the remittance network," he said. "It's interesting that this is a permissioned chain. It's not only a competitive maneuver but also allows them to lean on existent, proven network security techniques to keep coins safe."
He pointed to Blockchain's potential to save small and large financial institutions time and money. "FCMs and even the DTCC could do something like this. I don't see why they could not also create fixed income instruments in this manner as well. It's the next level up from cash."
Our own Chris Hehmeyer pointed to the distributed ledger technology behind JPM Coin.
"JPM has innovated a smart-contract platform called Quorum. Quorum is a private Ethereum form that in this case enables the use of a ZCash security layer," he said. "This step will open the flood gates of institutional innovation of Distributed Ledger Technology (DLT)."
While most of the people we talked to believe this is a new chapter for cryptocurrencies, Rumi Morales from Outlier Ventures believes an announcement does not equal a launch, equal adoption or broad usage. Referring to the Mitsubishi UFJ Financal Group (MUFG) coin first publicly announced in 2016 and CME's Royal Mint Gold coin in 2016, Morales believes "it’s a positive step forward on a road with thousands of footsteps already on it and millions more footsteps to come."
We may have some ways to go. But with someone like Jamie Dimon backtracking on cryptocurrencies, it makes one wonder how close we are to an economic revolution.