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Cryptocurrencies and big banks have always been dubbed as rivals. Cryptocurrencies are expected to take the reigns from banks when it comes to asset holdings and transaction processing. However, the two entities might not have to be the polar opposites of each other. Many major banks have hinted at investing in the future of cryptocurrencies and blockchain. This week, a major US bank, JPMorgan, has announced the launch of its own cryptocurrency.
Nearly two years ago, JPMorgan Chase chief Jamie Dimon famously bashed Bitcoin and called it a fraud only to be launching their own alternative to the supposedly infamous cryptocurrency. The new tokens by the bank are called JPM Coin, and the tokens are currently being tested to instantly settle transactions on a small portion of payments among clients of the bank’s wholesale payment business.
“The JPM Coin isn’t money per se. It is a digital coin representing United States Dollars held in designated accounts at JPMorgan Chase … When one client sends money to another over the blockchain, JPM Coins are transferred and instantaneously redeemed for the equivalents amount of U.S. dollars, reducing the typical settlement time.”
The company said in a press release that the JPM Coin will have a fixed value redeemable for one U.S. dollar. JPMorgan also stated that it operates with the premise that the decentralized nature of crypto technology can assist in reducing costs and offer more transparency.
The banking giant also asserted that the new digital coins will be first tailored for big ‘institutional clients’ which regularly conduct business-to-business transactions and not private individuals; yet, the ensuing financial advantages would ultimately trickle down to the institutional clients’ own clients. Only over the past several months, nearly 160 international banks jumped on a new blockchain venture with JPMorgan in order to create a better, more seamless global transactions.
JPMorgan believes that because of their position as the banking option to 80 percent of the fortune 500 companies, JPM Coin has a great chance of getting adopted even if other competitors arise with their own cryptocurrencies in the coming months.
It is important to note here that soon after the announcement by JP Morgan, Ripple CEO Brad Garlinghouse gave a statement on Twitter saying, “As predicted, banks are changing their tune on crypto. But this JPM project misses the point — introducing a closed network today is like launching AOL after Netscape’s IPO. 2 years later, and bank coins still aren’t the answer.” Mr. Garlinghouse has been a long critic of bank-backed cryptocurrencies and tokens. JPMorgan has yet to respond to his statement.