JPMorgan Coin (JPMCoin), Ripple, XRP — JPMorgan Chase, one of the world’s largest financial institutions and recognizable Wall Street bank, created a stir this week with the announcement of the JPMCoin.
On Feb. 14 the bank announced plans to issue its own digital coin, marking a complete 180 from the previous stance by the company and its focal CEO Jamie Dimon, who has regularly defamed Bitcoin and cryptocurrencies. However, the announcement came with a few details that will help distinguish the coin from its top-ranked adversary Bitcoin, as well as putting it in direct competition with blockchain startup Ripple and the XRP Coin.
For one, JPMCoin will be a stablecoin, with the plan to peg the value of the currency 1:1 with U.S. dollars. While the move is hardly a surprise, given the high price volatility of cryptocurrency and risk-averse nature of most banks, it immediately positions the coin in a class separate from digital assets more suited for investment. However, by making JPMCoin a stablecoin, in addition to marketing the coin as a remittance and bank-to-bank payment solution, JPMorgan Chase appears to be going after Ripple and third largest market cap coin, XRP. In an article titled “Is JPMCoin a Serious Threat to Ripple?” agrees with the sentiment that the announcement has greater implications for the team at Ripple.
While most in the industry of cryptocurrency remain skeptical of JPMorgan’s announcement and the exact nature of the JPMCoin on the open market–particularly in response to a lack of decentralization–the Forbes article rightfully points out that the move constitutes a rejection of of Ripple, XRP and the xRapid system. That’s not to say Ripple will not find a place on the global stage of remittance and cross-border transactions, but it does mean that JPMorgan has decided to look in-house for crypto/blockchain-based improvements in transfer efficiency.
JPMCoin, like XRP, will serve as the liquid token in global and cross-border transactions. When a client sends money through the service, their fiat is converted into JPMCoin and then redeemed for U.S. dollars. As Umar Farooq, JPMorgan’s Head of Digital Treasury Services and Blockchain explained,
“When one client sends money to another over the blockchain, JPM Coins are transferred and instantaneously redeemed for the equivalent amount of U.S. dollars, reducing the typical settlement time.”
As Forbes notes, that process is almost identical to Ripple’s xRapid service, with the distinction being XRP in place of JPMCoin and the lack of a price-pegged stable currency during the exchange. Having a stablecoin does offer broader advantages for JPMCoin in sole cross-border transactions–for one customers do not have to worry about the fluctuating price of XRP while waiting on transactions. However, XRP transfers are practically instant, with most of the delay coming through the middle-man hurdles imposed by banks and financial institutions.
Nonetheless the move by JPMorgan, as Forbes puts it, is a “slap in the face for Ripple.” At a time when cryptocurrency adoption is trending towards an all time high, Ripple and the xRapid service appeared to be well poised for bank adoption in 2019. While the XRP coin and Ripple’s fine-tuned service may still come to dominate the industry, the advent of the JPMCoin throws a wrench into that development.
It may turn out that JPMorgan’s move into cryptocurrency is more about publicity and giving the appearance of future-proofing for the bank. However, Ripple is now forced to contend with what could become a powerful competitor from the heart of Wall Street.