Attributes, Essence and Future Possibilities of JPM Coin
Some people compare JPM Coin to an enterprise stablecoin, but I don't think this analogy seems reasonable. Stablecoins are more like replicas of legal currencies in the digital world. They have functions such as payment, value scale, and storage means. They are a bridge linking digital currencies and traditional markets, and cross-border payment is one of its application scenarios. Judging from the fact that both ends of JPM Coin are fiat currencies, it is closer to XRP based on the Ripple protocol, acting as an intermediate tool for clearing and settlement.
We compared JPM Coin, USDT, and XRP in terms of usage, users, and blockchain-related technologies:
It should be noted that in the question about the purpose of JPM Coin, JPMorgan Chase officially responded, "For example, currency flow between major customers, payment in securities transactions, and JPM Coin will not only anchor the US dollar, but also expand to Other currencies." Then we can imagine that since it supports the circulation of currency, it can naturally support the circulation of other assets such as stocks and bonds. In addition, JPM Coin is issued on Quarum, a private chain project developed by JP Morgan. Quarum uses the Ethereum protocol, known as the enterprise version of Ethereum, and supports the issuance of digital assets based on physical assets.
But there is a problem here, JPM Coin is only open to major clients of JPMorgan Chase, then two clients of JPMorgan Chase can use JPMorgan Chase as a trusted intermediary to conduct any transaction they want, then the blockchain network here How is it different from traditional databases running on JP Morgan servers? What is the use of blockchain here? We believe that private chains like Quarum have more applications for smart contracts than blockchain technology.
However, if Quarum opens its permissions later and incorporates more nodes, then it will become a global clearing and settlement system similar to SWIFT based on the blockchain network.
In fact, we can already see signs in this direction, according to March 2018reuters reportsecondary title
Issuing currency by big banks may become a trend
This move by JPMorgan Chase may promote the trend of other banks issuing tokens.
In fact, some other big banks have already done so:
On February 16, 2019, Mitsubishi UFJ Financial Group (MUFG), Japan's largest bank, announced that it has established a joint venture with Akamai Technologies, a US-based financial technology company, and will launch a blockchain-based payment network in 2020. The system, dubbed the Global Open Network, can handle more than one million transactions per second, MUFG claims. In December 2017, MUFG partnered with technology company NTT to launch a blockchain proof-of-concept to improve cross-border transactions. As part of its blockchain research, MUFG was trying to develop its own digital currency, MUFG Coin, back in 2016.
Tokyo, December 2018 - Japan's Mizuho Financial Group has announced plans to launch a proprietary digital currency, J-Coin, that will allow free shopping and money transfers starting in March 2019. Its price will be fixed at 1 yen (1 cent) per unit. Users can transfer funds from their bank accounts to the smartphone app, return funds to their accounts or send money to other users without being charged a fee. It can be seen that J-Coin and JPM Coin are similar, but the J-Coin user group is for retail users.
In addition, SBI, the third largest bank in Japan, has also launched a currency issuance platform and issued a stable currency SB that is exchanged with legal tender to facilitate electronic payments. At present, SB is in the experimental stage that has not yet been certified by the Japan Financial Services Agency, and SB coins can already be used to pay in some convenience stores. Japanese people can first use legal currency to exchange SB, and then use SB for electronic payment.
In August 2016, four of the world's largest banks - UBS, Deutsche Bank, Santander and BNY Mellonannounced that it will launch“Utility Settlement Tokens (Utility Settlement CoinUSC), the project aims to promote central banks around the world to issue currency using blockchain technology. It aims to make it easier for global banks to conduct various transactions with each other by customizing mortgage assets on the blockchain, and is expected to become The industry standard for on-chain settlement. Last public reports included 11 financial institutions joining: Barclays, CIBC, Credit Suisse, HSBC, MUFG, State Street, UBS, BNY Mellon, Deutsche Bank, Santander Banks and NEX.
From August to early September 2016, on behalf of Accenture, a research institution conducted telephone interviews with practitioners of 32 commercial banks in the United States, Canada and Europe on the potential of blockchain/distributed ledger technology for interbank payments. Subsequently, Accenture organized the interview results into the article "Blockchain: How banks build a real-time global payment network (Blockchain technology: How banks are building a real-time global payment network?)》, the following are some data and opinions in the article:
90% of the banks surveyed indicated that they are exploring the application of blockchain for payment. About 3/4 of the banks surveyed are in the proof-of-concept, deployment strategy and research stages:
Among the various scenarios of using blockchain for cross-border payments, cross-border payments between enterprises are the most popular, with 45% of the banks surveyed ranking it as the first choice, followed by cross-border payments within banks Payment, cash pool, inter-bank cross-border payment outside the bank, cross-border remittance and cross-border payment between individuals:
The background of this trend is that there is a real demand for blockchain technology in the field of inter-bank settlement and cross-border payment.
At present, most cross-border remittances use the SWIFT model. Since the payer and the payee in cross-border remittances belong to different payment systems in different countries, the SWIFT model also needs the help of an intermediary bank. Take wire transfer, the most commonly used payment method, as an example. You first need to go to a bank branch to fill out the form, and then transmit the message through the SWIFT system (Society for Worldwide Interbank Financial Telecommunication, connecting more than 11,000 banks and financial institutions in 200 countries). Through the remittance bank, the central bank, the agency bank, the receiving bank and other institutions, each institution here has its own accounting system and clearing system, and agency relationships need to be established between different institutions; each transaction in cross-border payment The transaction not only needs to be recorded in the bank, but also needs to be cleared and reconciled with the counterparty, which leads to slow business processing in cross-border payments, high intermediate settlement costs, low payment efficiency, and considerable payment risks . Generally, the payee needs to wait 2-3 days before receiving the money. At the same time, you need to pay a certain handling fee and telegram fee during this process. The handling fee is usually 0.05%-0.1% of the remittance amount, and the telegram fee ranges from 0 to 200 yuan.
In contrast, blockchain payment directly eliminates the intermediate agency bank and central bank. Like JPM Coin, the funds are exchanged for JPM Coin at the remittance bank and then directly transferred to the other party's account, and the other party exchanges the same amount at the remittance bank. funds. It can save a lot of time cost and handling fee in the middle.
Here, what is more worth discussing is, if all banks issue coins, what kind of bank coins will have a competitive advantage? Our opinion is:First of all, there are not many large banks that enjoy a loose policy environment, and the mainstream attitude of banks is "do not issue coins on the chain". Although JPMorgan Chase has crabs, but blindly following is not the style of traditional financial institutions. The ceiling of issuing coins with a relatively stable price depends on the stock business volume of the corresponding scenario. From a financial point of view, it is still a "throttling" and will not increase the bank's "open source" income in the short term.secondary title
When banks issue coins, does Ripple still have cake?
The cross-border payment market is huge.According to Accenture data, the global cross-border payment scale reaches 25-30 trillion US dollars every year, but JPMorgan Chase transfers more than 6 trillion US dollars for enterprises every day in the wholesale payment business, plus other big banks, it is not good for Ripple small shock. Other Wall Street banks and institutions are also waiting for an opportunity to enter. according toRipple Market Report Q3 2018, large institutions and enterprises are continuing to switch to support encrypted transactions, but have not yet launched products. Ripple sees this as a potential market, but the emergence of JPM Coin provides a new direction for these institutions.
Over the years, the list of cooperation with Ripple has become longer and longer. There are currently 200 banks and 25 companies, including some top 10 big banks such as Bank of America and large enterprises such as Western Union, the world's largest cross-border remittance service provider. Remittance (Western Union) and the world's second largest money transfer service company MoneyGram (MoneyGram). But for a big bank like Morgan, Ripple is still on the road of encircling the city from the countryside.
References
References
J.P. Morgan Creates Digital Coin for Payments | J.P. Morgan
Credit Suisse report "Blockchain: The Trust Disruptor"
Santander says it's the first UK bank to use Ripple's blockchain tech for cross-border payments
Ripple Challenges the Global Remittance System: A More Accessible Financial Revolution
