JPM Coin: Observations from the FinTech world

There was much negative talk this week over JPMorgan’s launch of JPM Coin. Timo Schlaefer, CEO of Crypto Facilities, for instance, commented that, “JPMorgan continues to get it wrong. Using blockchain to run a closed network is like wearing a designer suit to wash your car.”

But that is shortsighted and misguided thinking, according to Ron Shevlin, Director of Research at Cornerstone Advisors. In an article for Forbes, he argues that the announcement has nothing to do with Bitcoin and cryptocurrencies in general.

Chase’s head of blockchain projects listed three use cases, all related to the bank’s corporate and institutional clients, for early applications of the coin:

• Cross-border payments. The cryptocurrency will enable Chase to settle international payments between clients in real-time, and at any time of day (which does not happen today).
• Securities transactions. Rather than relying on wires to buy a debt issuance, which would create a time gap between when a transaction settles and when investors get paid, institutional investors can use the token to generate instant settlements.
• Transaction consolidation. Clients of JPMorgan’s treasury services business will be able to replace the dollars they hold in subsidiaries across the world, enabling them to move money to subsidiaries around the world with greater fluidity.

“While Chase’s announcement focused on the short-term applications of using the JPM Coin internally, there’s an unspoken aspect to Chase’s strategy. The longer-term potential to do an end-run around the existing payments and remittances infrastructure,” Shevlin writes.

To test his hypothesis, he asked “some of the smartest people in payments and FinTech what they thought”. It’s an ecosystem play pure and simple. It’s about reducing costs and securing market share, said Bradley Leimer, Co-Founder, Unconventional Ventures.

“It really isn’t an ‘end run’. It’s more like creating a whole new playing field. It’s an acceleration of the continuing erosion of money fiefdoms. Due to margin pressures, money movement will eventually become a free utility. What the JPM Coin starts to enable is the elimination of the payment rails, which is really just a connection of ledgers, because with blockchain, there’s just one ledger. Once you have that shared ledger, the applications go beyond institutional payments to any payment type like remittances,” commented James Wester, Research Director, Worldwide Blockchain Strategies, IDC.

Shevlin concludes: “The critics of Chase who are focusing on Bitcoin and cryptocurrencies are completely missing the longer-term potential of the announcement. As the kids like to say, haters gonna hate. Their loss.”