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It is no news that the traditional financial market is being gradually disrupted by the advent of cryptocurrency; but the main point of interest in the crypto market right now as J.P. Morgan launched a its own stablecoin JPM Coin, is whether or not this new digital coin by an enormous tradtional financial institution will disrupt the existing financial markets and, perhaps more importantly, the stablecoin market.
Despite the crypto wariness and skepticism of the chief executive officer of J.P. Morgan, Jamie Dimon, the colossal renowned bank has already started experimenting with blockchain technology. First in their crypto rollouts is a private permissioned version of the Ethereum blockchain called Quorum. After a period of working further with blockchain technology, the bank rolled out another innovative idea, a stablecoin dubbed JPM Coin.
While there are several stablecoins in the market like Gemini Dollar and Tether, this is the first time a traditional financial institution is creating its own stablecoin. The JPM Coin is designed to help reducing clients’ counterparty and settlement risk. According to the bank, this initiative will go a long way to decrease capital requirements and enable instant value transfer.
Like every other stablecoin, JPM Coin will be backed by the firm’s desired fiat currency. Currently, there are speculations on how well the virtual coin will fair against the US dollar but the firm is yet to decide on the currency to back JPM Coin. There is also a high probability that the coin would be backed by different fiat currencies such as Euro (JPMEUR), Yen (JPMJPY), and as stated the US dollar (JPMUSD).
Although it is slightly different from the conventional stablecoins, JPM Coin operates in virtually the same principle as other stablecoins. It is issued, transferred and redeemed as just about any stablecoin out there. The digital coin will be issued on the firm’s blockchain, Quorum, which has proven to be a step higher than the Ethereum blockchain. Quorum is designed to operate both private and public segments. A stablecoin controlled by a private blockchain may offset the stability in the market.
Should this test go as planned, this will show institutions out there that they do not need to rely on public blockchain; sooner or later, you might find the crypto market flooded with private stablecoins. Well, we can’t say with certainty that JPM Coin will cause any disruption yet, at least not until it can widen its horizons above the firm’s clients to include a bigger pool of institutional and private investors. The virtual coin which is proposed to offer lots of benefits and use cases is also speculated to take on Ripple in the crypto market.
Until proven otherwise, we still doubt a private and permissioned stablecoin has what it takes to pull institutional investors from public blockchain towards private blockchain, which just might be the antithesis of the original vision behind crypto.