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Settling the skepticism over JPM Coin

Updated: Apr 3, 2021

During the past week and this weekend, the financial services industry has witnessed an overdoze of journalism surrounding JP Morgan's first (big) entry into the crypto-coin space and most of it is focused around questions related to Jamie Dimon's previous critical views about "Bitcoin" when he had said - "You cant have a business where people can invent a currency out of thin air and think that people who are buying it are really smart. It's worse than tulip bulbs".

The debate over Dimon's earlier comment on "Bitcoin" in the context of JPs recent announcement of JPM-Coin is completely uncalled for and reflects media's general lack of awareness about the fact that "Bitcoin" as a use case over blockchain is a completely different subject when compared to "Blockchain" as a framework that may have much wider application in most industries.

If Jamie Dimon was to be asked today, he may still respond with equal scientism (right or wrong is not the point) on Bitcoin as an alternate permission-less currency but it doesn't mean that banks have not been investing on the technology to build alternate use cases. Most of media is not getting it that JP has not built an alternate to Bitcoin with JPM Coin.

JPM-Coin (to be branded as stablecoin), is a token that will be linked to USD and which will be transacted over JPs permissioned DLT framework, enabling clients to send money to another over the blockchain. The framework will allow the tokens (as coins) to get transferred instantaneously and subsequently redeemed for the equivalent amount of U.S. dollars. Thereby reducing the typical settlement time and inefficiencies in the system.

The phrase "coin" - as a token (in this case) should not be misunderstood with "coin as in currency". And therefore it must also be understood that the value of this token (within the permissioned DLT) will be fixed to a dollar because the purpose it solves is bringing in efficiency to settlements. The objective not being to let JP-Coin trade in open market in a permissionless ecosystem where the market demand and supply would determine the coins price vis-a-vis any other currency.

In summary - let us all learn a little more about this fantastic framework that has much wider application across many industries, and not be simply critical about a person's or an organization's strategic interest in building more reusable platforms towards tackling higher order problems which have so far not been solved by traditional means. Quite like the Italian inter-bank reconciliation system that is being completely rewritten using the same combination of technology and concepts under the project name "Spunta". And by the way, Project Spunta is built of r3-Corda , the corner stones of which were laid by some of the large banks of which JP was one, till it parted from the consortium in mid 2017 to pursue a very distinct technology path which was thought to be at odds with the one chosen by the r3 at that time. As "Spunta" goes into pre production this year with the complete Italian banking reconciliation system to be tested with hundreds of millions of transactions inside the platform it's just a matter of time when we will see more consortiums coming together within the banking networks to successfully deliver concepts surrounding DLT.

The industry will not be surprised if JP-Coin is made scalable enough and in a period's time, published outside as an open source platform so that it becomes another reconciliation plus settlement system across banks if there is value seen in scalability. And there is everything right about healthy competition in this space.

A message to all skeptics in this space - "hold our thoughts, or give it any name but tokens and smart contracts are in". Innovators have done their job, early adaption (like one being biacussed here) are taking it to the next stage. Now it's a matter of choice for the skeptics to either get on the bandwagon, or fall in the category of "late majority", "laggards" !

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