JPMorgan Chase & Co. announced the creation of JPM Coin, a digital token representing a fiat currency, in a news release issued in February 2019. JPM Coin uses blockchain technology that will facilitate the transfer of payments between institutional clients. The coin is fundamentally different from cryptocurrencies like Bitcoin. Most significantly, it is redeemable at a 1:1 ratio for fiat currency held by JPMorgan. JPM Coin was still part of the company's plans for the future as of February 2020.

Key Takeaways

  • JPM Coin is a proposed stablecoin that JPMorgan plans to redeem for U.S. dollars on a 1:1 basis.
  • When it launches, JPM Coin will only be available to large institutional clients of JP Morgan, not individual users.
  • JPM Coin is designed to speed up the transfer of funds.
  • JPMorgan was still developing JPM Coin as of February 2020.

What Is JPM Coin?

JPM Coin is primarily a tool to help instantly transfer funds between some of JPMorgan's clients. Such a digital currency is needed for an exchange of money to take place between parties on a blockchain ledger. JPM Coin is the tool that helps to complete that process more efficiently than traditional settlements.

JPM Coin is not money in the ordinary sense. Instead, it is a digital token that represents U.S. dollars held by JPMorgan Chase. It maintains a value equal to one U.S. dollar. If JPMorgan Chase deems the launch of JPM Coin to be successful, the bank plans to use it with other fiat currencies in the future.

It will be relatively straightforward for clients to use JPM Coin. First, a client deposits a sum in a particular account and receives corresponding JPM Coins. Next, these coins can be used to facilitate transactions across a blockchain network and with other JPMorgan clients. Finally, clients may redeem their JPM Coins with the bank to receive U.S. dollars at any time.

While JPM Coin is similar to other stablecoins, there are also some crucial differences. First, most stablecoins are open access and available to the public. On the other hand, JPM Coin will only be available to specific JPMorgan clients with proper permissions. In particular, those clients must be institutional customers of the bank. JPM Coin is designed to facilitate the transfer of funds, while most stablecoins are seen as investment tools. Finally, JPM Coin will always be redeemable in fiat currency held by JPMorgan. That makes it much more transparent than many stablecoins, such as Tether.

JPMorgan Coin should be more stable than most other stablecoins.

What Does It Mean?

JPMorgan Coin brings the reputation of one of the largest and most stable banks in the world to a new and uncertain financial technology. Furthermore, JPMorgan Chase is fully compliant with U.S. and international banking laws and regulations. Regulatory oversight has long been a point of contention within the cryptocurrency space. The backing of a major bank may entice some previously skeptical investors to begin to explore the digital currency space. However, it is important to note that JPM Coin was still in development as of February 2020.

What Comes Next?

As it currently stands, JPM Coin will only be used to facilitate payments between institutional clients of JPMorgan Chase. In the long run, the bank intends to expand this program to include other currencies. Perhaps, JPM Coin may eventually be available to individual customers. As the first program of its type from a major U.S. bank, JPM Coin could help to bring digital currency transaction settlements to the mainstream financial world. The development of JPM Coin represents a change of heart for JPMorgan CEO Jamie Dimon, who previously called Bitcoin a fraud.