J.P. Morgan Expands its Crypto and Blockchain Vision

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J.P. Morgan has demonstrated an unwavering dedication to integrating blockchain technology into its business operations since 2015. Over the past seven years, they have undertaken more than 60 proof of concepts, focusing on both internal initiatives and client-facing projects.

J.P. Morgan Chase, one of the world’s largest banks, has made notable progress in its blockchain endeavors by introducing euro-denominated payments for its corporate clients using JPM Coin, its blockchain-powered digital currency.

Euro payments on the JPM Coin platform have been rolled out, expanding upon the existing system that primarily focused on US dollar transactions. This expansion enables corporate clients to seamlessly conduct cross-border transactions in euros using JPM Coin, the digital currency native to J.P. Morgan. By utilising blockchain technology, these payments offer faster settlement times, enhanced security, and improved accessibility.

JPM Coin serves as a crucial catalyst for facilitating euro payments on the blockchain. It functions as a stablecoin, providing stability during transactions by pegging its value to assets like the US dollar or euro. JPM Coin leverages blockchain’s decentralised ledger technology to enable swift and secure transfers, eliminating the need for intermediaries and enhancing transparency.

The integration of JPM Coin and blockchain technology in euro payments offers numerous benefits. Firstly, it enables round-the-clock transactions, removing the constraints imposed by traditional banking hours and increasing convenience and operational efficiency. Additionally, blockchain-powered payments ensure faster settlement times compared to conventional systems, reducing processing delays. The decentralised nature of blockchain enhances transparency, security, and immutability, mitigating the risk of fraud and instilling trust in financial transactions.

j.p morgan 's jpm coin and the j.p. morgan offivce along with its flag in the background
Only institutional clients have access to JPM Coin, and it is only used to settle payments. Image Source

Although JPM Coin has gained considerable attention in the blockchain space, its current role within JPMorgan’s payment business remains relatively minor. Since its launch in 2019, JPM Coin has processed around $300 billion in transactions, which, although substantial, is only a fraction compared to the daily processed payments totaling nearly $10 trillion handled by J.P. Morgan. Nevertheless, JPM Coin’s usage by wholesale clients enables efficient transfers between multiple J.P. Morgan accounts, cross-customer transactions, and continuous payments outside regular business hours.

J.P. Morgan’s exploration of blockchain technology aligns with a broader trend seen among traditional banks. Other major financial institutions, like Goldman Sachs, have also ventured into blockchain and digital asset initiatives to streamline operations and offer innovative financial services.

For example, Goldman Sachs introduced its blockchain platform, allowing clients to issue financial securities in the form of digital assets. Collaborative efforts involving multiple banks, such as the digital bond issuance by the European Investment Bank in collaboration with Goldman Sachs, Societe Generale, and Banco Santander, further demonstrate the increasing adoption of blockchain in the banking sector.

Circle’s US Dollar Coin (USDC) has been announced as the choice for cross-border payment testing by SAP, the largest non-American software company by revenue. This development aims to accelerate the process for small and medium-sized enterprises (SMEs) looking to send funds internationally. USDC, a stablecoin pegged to the U.S. dollar, will be received by SAP customers as “play money” to facilitate testing of this payment option. It’s worth noting that the testing will occur on a separate blockchain from Ethereum and does not currently involve real ERC-20 dollar tokens.

Collaboration with Indian Banks for Blockchain-Based Interbank Settlement

J.P. Morgan has been actively exploring the potential of blockchain and cryptocurrency. The institution has made notable progress in areas such as tokenization, digital asset custody, and blockchain-powered payment systems.

J.P. Morgan has collaborated with several prominent Indian banks, including HDFC Bank, ICICI Bank, Axis Bank, Yes Bank, IndusInd Bank, and J.P. Morgan’s own banking unit at Gujarat International Finance Tec-City (GIFT City) to enable instant transactions 24/7 interbank settlements.

One of the limitations of the current interbank settlement system is its unavailability on weekends and public holidays. However, the blockchain pilot initiated by J.P. Morgan and the Indian banks aims to overcome this barrier, allowing for continuous settlement throughout the week. This enhancement provides greater flexibility and accessibility, facilitating faster and more efficient transactions.

The announcement of the blockchain-based interbank settlement project by J.P. Morgan aligns with its currency strategists’ observations of emerging de-dollarization. This trend refers to a reduced reliance on the U.S. dollar in international transactions, observed among countries and institutions. By adopting blockchain technology and facilitating instant interbank settlements, J.P. Morgan and the participating Indian banks contribute to the evolving financial landscape, promoting efficiency and potentially reducing dependency on traditional settlement systems.

J.P. Morgan ‘s Milestone in Cross-Border Trade on Ethereum’s Layer-2 Network

J.P. Morgan executed its first DeFi trade on the Polygon blockchain, marking a notable milestone in its adoption of blockchain technology. This successful trade was made possible through Project Guardian, a pilot program led by the Monetary Authority of Singapore (MAS), which aims to explore potential DeFi applications in wholesale funding markets.

During the initial trials, J.P. Morgan collaborated with various partners, including Temasek, DBS Bank, SBI Digital, Marketnode (Singapore Exchange), and its own blockchain unit for wholesale payments, Onyx. The trade involved the tokenization of Singapore dollar (SGD) deposits for foreign exchange (FX) transactions, as well as the tokenization of Japanese yen (JPY) assets.

As part of this initiative, J.P. Morgan developed on-chain verification of verifiable credentials (VC) to enable compliant access to DeFi protocols such as Aave. This innovative approach seeks to enhance the user experience by eliminating the need for repetitive know-your-customer (KYC) checks on the DeFi front end, while ensuring compliance with regulatory requirements.

J.P. Morgan’s successful cross-border trade contributes to the growing list of notable achievements in blockchain adoption within the financial sector. For instance, in April 2021, the European Investment Bank (EIB) issued digital bonds on a blockchain network, demonstrating the increasing acceptance and utilisation of blockchain technology for traditional financial operations.

This level of commitment to blockchain is unparalleled among other major companies. J.P. Morgan’s notable achievements during this period include the introduction of Quorum in 2016, a blockchain fork of Ethereum tailored for enterprise use.

J.P. Morgan introduced its Onyx blockchain-based platform in 2020, where the JPM coin plas a crucial role, with the objective of improving the quality of wholesale payment transactions. The platform has gained significant traction, with the bank reportedly processing nearly $700 billion in short-term loan transactions through Onyx as of April 2023. The collaboration with Indian banks further strengthens J.P. Morgan’s commitment to leveraging blockchain technology for enhanced financial services.

Their Onyx platform not only supports repo transactions but also hosts the Liink network, which enables over 100 participants to exchange payment-related information swiftly, reducing inter-institutional payment processing time.

onyx by j.p. morgan as seen on the official website
Onyx is the first blockchain network for the exchange of value, information, and digital assets headed by a bank in the world. Image Source

As part of the Monetary Authority of Singapore’s Project Guardian, J.P. Morgan engaged in DeFi trades on the public Polygon blockchain in 2022, collaborating with DBS Bank. This exemplifies their ongoing exploration of new frontiers in the blockchain space.

Being the world’s largest bank outside of China, J.P. Morgan continues to process over $1 billion per day on blockchain, showcasing the scalability and efficiency of their blockchain infrastructure.

J.P. Morgan’s dedication extends beyond transaction processing. They actively explore asset tokenization initiatives that align with their ecosystem and customer base expansion goals. Recently, they registered the trademark “J.P. Morgan Wallet,” indicating potential developments in this area.

Additionally, J.P. Morgan has made significant strides in the cryptocurrency space. They provide cash management services for dollar-based transactions on platforms like Coinbase and Gemini. Furthermore, they have granted access to Bitcoin and other cryptocurrencies to their wealth management clients, showcasing their openness to emerging digital assets.

J.P. Morgan’s extensive investments, initiatives, and developments in the blockchain field position them as pioneers in the industry. Their commitment to innovation, collaboration, and exploration sets them apart and solidifies their leading role in blockchain adoption within the financial services sector.

During a panel discussion at the Money20/20 event, key industry figures Basak Toprak, Executive Director of EMEA Head of Coin Systems and Onyx at J.P. Morgan, and Mauricio Magaldi, Global Strategy Director, Crypto at 11:FS, offered valuable insights into the evolving crypto landscape.

Magaldi emphasized the importance of ongoing learning and collaboration in the crypto space, highlighting that even regulators and legislators are still grappling with understanding the industry’s implications. He underscored the need to avoid replicating traditional finance practices and instead implement new on-chain practices to improve data transparency and establish industry standards.

Toprak echoed Magaldi’s sentiments, highlighting successful collaborations with authorities, such as a project in Singapore that prompted industry stakeholders to address payment and clearing challenges. This initiative led to the creation of a platform that encouraged further exploration of decentralised finance (DeFi) applications.

Acknowledging the varying speeds of regulatory development across countries, Toprak stressed the significance of cross-border sharing of experiences. She emphasized the role of collective platforms, like enterprise investment schemes, in facilitating discussions and knowledge exchange among industry participants.

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