As CEO of the largest bank in the US, Jamie Dimon has spent a lot of time railing against the world of cryptocurrencies. He’s done everything from calling it a scam to saying it was a stupid person’s investment. All this makes it far more hilarious that JP Morgan is releasing its very own cryptocurrency product.
Apparently, JP Morgan has been handling Bitcoin trades for years, even as Dimon called it a fraud. A key distinction here is that Dimon is a supporter of blockchain technology at large, but specifically thinks Bitcoin is not a smart investment.
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JPM Coin’s Main Purpose
With the release of JPM Coin, JP Morgan is hoping to improve the speed and efficiency of settlements for 3 divisions within their company. International settlements will the be initial focus of JPM Coin, which is similar to the way Ripple uses XRP to outmatch many of the solutions currently provided by banks. Treasury services and securities transactions are the other two departments planned to use the cryptocurrency.
The contrast is between Bitcoin and this supposed cryptocurrency is quite stark. Yes it has a ledger and tokens, but without the ability to have immutable transactions that are censorship resistant, many of the benefits of Bitcoin are lost. The bank may not see these as necessary features, but that is because those features limit their power over the system.
Bitcoin is for users who wish to navigate the financial world without fear of being limited by governments (as well as banks). Then you have “2nd generation” coins like Ether which have smart contracts and other use cases built into them. This is where we could see JPM Coin having a stronger public use case, but it would still lack the decentralization that makes true cryptocurrencies so desirable to their adherents.
The internal use of JPM Coin justifies the lack of decentralization, and rather than viewing this as a threat to Bitcoin, it could be taken as a tacit admission that the technology has merit. It is the first real-world use of a digital currency by a major bank, and if the settlement speed improves, everyone benefits.
Where Does This All Go?
Bitcoin will still have its benefits over centralized bank solutions like this, and users still be able to make the decision between JP Morgan’s solutions and true cryptocurrencies. In a way, everyone wins and the people who trust the system enough to not want to use cryptocurrency will benefit from blockchain innovations as well.
Banco Santander and IBM have just announced a partnership to help speed up the development of their use of blockchain technologies. Additionally, a South Korean telecoms is intending to establish their own cryptocurrency. Basically, everyone wants to enter the space that has until now been mostly dominated by relative unknowns.
Now, as we discussed yesterday, Ripple is another company in the financial space that has a “cryptocurrency that isn’t really a cryptocurrency”. Both of these examples can provide an increase in utility (and create profit for the companies using them) without functioning as legitimate cryptocurrencies. The bigger question is how much blockchain technology actually helps in this case, or if it is just a buzzword being used to garner attention.