JPMorgan Chase is gearing up to test its new digital currency, JPM Coin. The bank says it plans to start trials for several corporate customers who will be able to use the coin for inter-company remittances, bonds and commodities transactions, reports Bloomberg Japan.
Umar Farooq, head of digital treasury services and blockchain at JPMorgan, says customers in Europe, the US and Japan, among other countries, are interested in utilizing the digital currency to speed up transactions while lowering costs.
“The technology is very good, but it takes time in terms of licensing and approval.”
By backing securities, JPM Coin is designed to leverage blockchain technology that powers “instant” delivery, outperforming current infrastructure that can take a day to settle government bond transactions, even among domestic companies, and expose a party to the risk of an unfulfilled contract due to a counterparty’s bankruptcy.
As more tech companies and big banks explore blockchain technology and the issuance of their own digital tokens, cryptocurrency innovators point out that these emerging corporate payment rails are closed, centralized systems. Like Facebook, JPM Coin will operate on a permissioned blockchain subject to regulators and will only be available to customers on its platforms.
Cryptocurrencies such as Bitcoin and Litecoin, by contrast, are configured to power an open global financial system that is decentralized and not under the jurisdiction of any one country or government. Bitcoin transactions persist with or without the consent of governments, as the network was originally designed to resist censorship and any centralized authority.
JPM Coin runs on top of Quorum, an open source software project built on Ethereum’s blockchain technology. It has additional features geared specifically for large enterprises requiring scalability, security and a robust privacy layer.