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Could J.P. Morgan’s Blockchain Ecosystem Be Changing The Game?

On February 14, 2019, J.P. Morgan announced the creation of the first major bank cryptocurrency. This was massive news as the company is a global financial powerhouse with more than six trillion dollars in daily transactions. 

 Over the past few years, JPMorgan CEO, Jamie Dimon, has repeatedly expressed skepticism for bitcoin and cryptocurrency — including calling it a “fraud” and “worse than tulip bulbs” — while lauding the application of blockchain technology more broadly. Now however, in a statement announcing the new coin, the firm  said, “We have always believed in the potential of blockchain technology and we are supportive of cryptocurrencies as long as they are properly controlled and regulated. As a globally regulated bank, we believe we have a unique opportunity to develop the capability in a responsible way with the oversight of our regulators.”  There was no comment on how the new coin fit into Dimon’s stance on cryptocurrency in general

 

What is JPM Coin?

JPM Coin is a “stablecoin” pegged to the U.S. Dollar. A stablecoin is a blockchain based asset meant to trade equally with some other asset (USD, JPY, Bitcoin…etc)  in order to avoid free floating market volatility. Essentially JPM coin is constructed to make instantaneous payments using blockchain technology. The project is currently active as of the writing of this article (Sept 2019)  with it being used primarily for institutional clients transfers with the ability for retail customer use in the coming future. 

How it Works

When a client of the bank deposits funds, they will receive the same amount of JPM Coin back. Then, these coins are used for transactions over a blockchain network with other clients of the bank. The coin will be issued on JPMorgan’s own blockchain, Quorum (more about that later).  Lastly, holders of JPM coin will redeem them for USD at the bank. JPMorgan said in its announcement that a JPM Coin will always have the same value as a U.S. dollar. However, the firm plans to eventually offer JPM Coin in other major currencies, its announcement said. 

What is Quorum?

As mentioned previously, JPMorgan has developed its own blockchain in order to facilitate these transactions called Quorum.  Quorum is a permissioned variant of the go-Ethereum client (geth) developed through JPMorgan’s partnership with the Ethereum Enterprise Alliance focusing on financial service applications. The objective behind this is to provide an implementation of Ethereum which supports transactions and contract privacy. This blockchain is different from Ethereum in that it has  network/peer permission management, enhanced transactions with contract privacy, and voting-based consensus mechanisms. Quorum currently powers both internal and external use-cases, including: IIN/JPM Coin, komgo, Synaptic Health Alliance, and Vakt. The early applications of the token include international payments, securities transactions, and treasury services. The list of pilot projects being developed on Quorum are quite impressive, including: 

State Farm + USAA — Using blockchain to automate the time-consuming and paper-heavy processing of automobile claims by replacing existing systems for subrogation.

Video Game Royalties — Microsoft and Ernst & Young are working on a blockchain solution expected to reduce processing time and faster tracking of royalties first in the video game industry. 

Starbucks — Implementing Microsoft’s Azure Blockchain Service and Quorum to track coffee production

LVMH — Owner of the iconic Louis Vuitton label, prepares to launch a blockchain for proving the authenticity of high-priced goods

With the May 2nd, 2019 announcement that Microsoft is now partnering with JPMorgan Chase to promote the Quorum blockchain to the global tech giant’s business customers, we anticipate many more projects and initiatives developing quickly in this ecosystem

 

 

If you would like to learn more, BlockSpaces will be hosting an Introduction To JPM Coin and the Quorum Blockchain session on October 2nd.  Details and tickets available here.

 

 

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