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Settling the skepticism over JPM Coin

During the past week and this weekend, the financial services industry has witnessed an overdoze of journalism surrounding JP Morgan's first (big) entry into the crypto-coin space and most of it is focused around questions related to Jamie Dimon's previous critical views about "Bitcoin" when he had said - "You cant have a business where people can invent a currency out of thin air and think that people who are buying it are really smart. It's worse than tulip bulbs"

The debate over Dimon's earlier comment on "Bitcoin" in the context of JPs recent announcement of JPM-Coin is completely uncalled for and reflects media's general lack of awareness about the fact that "Bitcoin" as a use case over blockchain is a completely different subject when compared to "Blockchain" as a framework that may have much wider application in most industries.

If Jamie Dimon was to be asked today, he may still respond with equal scientism (right or wrong is not the point) on Bitcoin as an alternate permission-less currency but it doesn't mean that banks have not been investing on the technology to build alternate use cases. Most of media is not getting it that JP has not built an alternate to Bitcoin with JPM Coin.

JPM-Coin (to be branded as stablecoin), is a token that will be linked to USD and which will be transacted over JPs permissioned DLT framework, enabling clients to send money to another over the blockchain. The framework will allow the tokens (as coins) to get transferred instantaneously and subsequently redeemed for the equivalent amount of U.S. dollars. Thereby reducing the typical settlement time and inefficiencies in the system.

The phrase "coin" - as a token (in this case) should not be misunderstood with "coin as in currency". And therefore it must also be understood that the value of this token (within the permissioned DLT) will be fixed to a dollar because the purpose it solves is bringing in efficiency to settlements. The objective not being to let JP-Coin trade in open market in a permissionless ecosystem where the market demand and supply would determine the coins price vis-a-vis any other currency.

In summary - let us all learn a little more about this fantastic framework that has much wider application across many industries, and not be simply critical about a person's or an organization's strategic interest in building more reusable platforms towards tackling higher order problems which have so far not been solved by traditional means. Quite like the Italian inter-bank reconciliation system that is being completely rewritten using the same combination of technology and concepts under the project name "Spunta". And by the way, Project Spunta is built of r3-Corda , the corner stones of which were laid by some of the large banks of which JP was one, till it parted from the consortium in mid 2017 to pursue a very distinct technology path which was thought to be at odds with the one chosen by the r3 at that time. As "Spunta" goes into pre production this year with the complete Italian banking reconciliation system to be tested with hundreds of millions of transactions inside the platform it's just a matter of time when we will see more consortiums coming together within the banking networks to successfully deliver concepts surrounding DLT.

The industry will not be surprised if JP-Coin is made scalable enough and in a period's time, published outside as an open source platform so that it becomes another reconciliation plus settlement system across banks if there is value seen in scalability. And there is everything right about healthy competition in this space.

A message to all skeptics in this space - "hold our thoughts or give it any name but tokens and smart contracts are in". "Innovators" have done their job, "Early Adapters" like this one are taking it to the next stage. Now it's a matter of choice for the skeptics to either get on to the bandwagon or fall in the category of "late majority" + "laggards" !


Comments: (6)

A Finextra member
A Finextra member 20 February, 2019, 23:25Be the first to give this comment the thumbs up 0 likes

One question. Does the real money of JPM Coin remain inside the ledger of JP Morgan Chase until a party redeems the JPmcoins at a participating institution?  

Prasoon Mukherjee
Prasoon Mukherjee - Societe Generale Bank - Bangalore 21 February, 2019, 05:12Be the first to give this comment the thumbs up 0 likes

Hi Philip,

Using this framework, when a client of JP would send money to another client of JP (as it will be intrabank to start with), over this network, tokens (JPM Coins) will be instead transferred and instantaneously these tokens will be redeemed for the equivalent amount of U.S. dollars, thus reducing the typical settlement time. 

Therefore each token (JPM Coin) will always be equivalent to one U.S. dollar as i explained in the column above.

The key to understanding the framework is in its scalablity in being agnostic to any currency becausse its just a token on the Distributed Lledger which will ideally help in representing a clients stake on the blockchain based on his currency reserve with the bank.

Therefore to answer your question:

  • JPM Coin (as a token) remains inside the ledger.
  • Howevber the redemption is instantaneous.
  • And there is no concept of participating institutions yet. Because it will be just "intrabank" to begin with. So i would rather put it as "participating JP Clients"
A Finextra member
A Finextra member 21 February, 2019, 12:44Be the first to give this comment the thumbs up 0 likes

Let me try again :)  I the sender have funds on deposit at JPMC. I use a blockchain mechanism to request coins in exchange for funds on deposit.  The sender then communicates with the received and they execute and record a transaction on the chain.  The receiver then presents the coins to JPMC.  Real electronic money is deposited in their Chase account.

Everything happens inside Chase.  Chase is the trusted intermediary, right?

Yes, we could argue there is movement between the accounts of different legal entities within Chase the Chase institutions.  

Until there is true movement between different financial institutions. I don't see the magic.


Ketharaman Swaminathan
Ketharaman Swaminathan - GTM360 Marketing Solutions - Pune 21 February, 2019, 17:53Be the first to give this comment the thumbs up 0 likes

Blockchain was supposed to eliminate middleman. Instead, JPCoin seems to be adding middleman, that too a highly contrived one.

Prasoon Mukherjee
Prasoon Mukherjee - Societe Generale Bank - Bangalore 23 February, 2019, 12:52Be the first to give this comment the thumbs up 0 likes

Dear Ketharaman,

Can you explain in detail as how with JP Coin do you see that there is an introduction of a new middleman? 

Consider before answering the  following :

1) Difference between permissioned and permissionless blockchain frameworks. And if you are still comparing Bitcoin with this then at some stage u will have to stop doing that. Gen2 of all blockchain frameworks are mostly permissioned and they are being modeled to solve more than one problem.  Which means that not all are looking at the middleman problem only. 

2) That not all DLTs are blockchains atall.  For example CoRDA. And in the financial services world you will see more of CoRDA kind of frameworks being adopted to solve, not always the trust issue, but also bigger problems like innefficiecies in settlements and reconciliations.

3) There are more than one use-case of this generic framework and banks (to begin with) are not Investing in this technology  to remove the need of a central guarantor but to solve other problems. 

See this has a constructive discussion and not an argument :). 

Happy to connect with you on LinkedIn if you want a more detailed conversation surrounding this. 

You may also want to study "Project Spunta" to clear some of the perceptions surrounding this. 




Ketharaman Swaminathan
Ketharaman Swaminathan - GTM360 Marketing Solutions - Pune 23 February, 2019, 15:17Be the first to give this comment the thumbs up 0 likes

Transaction flow without JPMCoin: Payer USD ---> USD @ J P Morgan Chase Inc. ---> Payee USD.

Transaction flow with JPMCoin: Payer USD ---> USD @ J P Morgan Chase Inc. --> JPMCoin @ wherever it is ---> Payee USD (if not Payee JPMCoin ---> Payee USD). 

JPMCoin is the "highly contrived middleman" added to the transaction flow by J P Morgan Chase Inc. by using JPMCoin / Blockchain.

Prasoon Mukherjee

Prasoon Mukherjee

Director | Head of Securities Services | GSC-India

Societe Generale Bank

Member since

13 Aug 2018



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