Morgan currency is a digital currency based on legal currency, that is, a stable currency, while Bitcoin is a pure virtual currency without any asset support. It is a pure value transfer, similar to gold, and it should be some form of stable currency that can survive . A blockchain era marked by the rise of stablecoins is on the way.
JP Morgan Chase CEO Jamie Dimon has raised eyebrows for criticizing bitcoin as a "fraud." In a later interview, Jamie softened his attitude, but he still predicted that any cryptocurrency will eventually not be adopted by the mainstream because governments around the world will not allow this to happen. A year later, on February 14, JPMorgan Chase announced the launch of its own digital currency, JPM Coin, becoming the first major U.S. bank to introduce its own digital currency for practical use. This unexpected move has attracted widespread attention and is regarded as a milestone in Wall Street's move towards blockchain technology.
JPM Coin can be exchanged 1:1 for fiat currency held by JPMorgan Chase, currently only for US dollars. The way JPM Coins work is that JPMorgan clients submit deposits to designated accounts and convert them into JPM Coins of the same amount. After that, conduct transactions with other JPMorgan Chase customers through the blockchain network, such as transfers and remittances or payments in securities transactions). Finally, the holder of the JPM Coin converts it to USD at JPMorgan Chase, closing the transaction. Its benefits are clear: reduced trading and settlement risk for clients, reduced capital requirements and instant value transfer.
At the same time as the launch of JPMorgan coins, JPMorgan Chase explained its official attitude towards digital currencies: "We have always believed in the potential of blockchain technology, and as long as they are properly controlled and regulated, we support cryptocurrencies." This statement is consistent with the CEO's The rhetoric is almost in the opposite direction, is Jamie wrong or JPMorgan changed its mind? In fact, Jamie can be said to be wrong or Jamie can be said to be right. Because Morgan Coin is a stable currency, it is fundamentally different from Bitcoin. The so-called stable currency is a digital currency based on legal tender, while Bitcoin is a pure virtual currency without any asset support.
The biggest application of blockchain is in the financial industry, especially cross-border finance. JPMorgan Chase provides banking services to about 80% of Fortune 500 companies, and every banking transaction of these multinational companies is likely to be cross-border. In this sense, the launch of Morgan Coin is unexpected but reasonable.
In China, although issuing currency is a sensitive matter, China is not behind in the application of blockchain, and is even quite ahead. For example, Ant Financial's blockchain cross-border remittance service allows Filipino workers in Hong Kong and Pakistanis in Malaysia to remit money to the Philippines and Pakistan on their mobile phones, and the funds can arrive in seconds. The Morgan Coin is currently only a prototype in the testing stage, designed only for business-to-business capital flows, and has not yet been opened to individuals.
Although Ant Financial has taken the lead in the implementation of blockchain technology, its status and role in the banking system are completely different from those of JPMorgan Chase. If the U.S. financial regulatory authorities are open enough to allow JPMorgan Chase to expand from the current corporate customers only to individual consumers in the future, this will establish the influence of the U.S. dollar in the global blockchain, which is a very strategic step.
It is the visible value of JPMorgan coins for payment, and another layer of invisible value is that JPMorgan Chase is a custodian bank with a very high reputation. For the digital currency ecosystem, once the technical capabilities of the custodian bank are in place, it will be much more convenient for individual consumer-oriented banks such as Goldman Sachs to enter the blockchain. Of course, in this process, it will take quite a long time for financial institutions and regulators to work together. In the final analysis, it is not the most important thing that blockchain technology can cause waves in Wall Street, but the most important thing is regulation. If the regulatory authorities can take a liberal attitude towards the blockchain, the blockchain has huge opportunities.
Credit is the lifeline of finance. Why do Wall Street executives get incredible salaries? Because the whole society cannot operate without trust. Financial institutions act as a trust mechanism through long-term capital accumulation, or through its reputation, and extract high profits from it. As an example, two companies want to settle stock options, but neither trusts the other, so they hire a third-party stock exchange to trade and pay for it. If we can now generate a trust mechanism through the blockchain, many things can be guaranteed if a blockchain is used, and the impact on Wall Street will be huge. The International Data Corporation predicts that businesses and governments will spend $2.1 billion on blockchain in 2018, more than double the previous year.
The total market value of global cryptocurrencies has exceeded 140 billion US dollars at the end of February, and the price of Bitcoin has exceeded 4,100 US dollars. But in fact, virtual currencies without physical support, except for Bitcoin and Ethereum, are difficult to succeed in the end, and even Bitcoin and Ethereum may eventually fail. Because they are pure value transfers, similar to gold, and there is only one and only one kind of gold. What will survive should be some form of stablecoin.
Stablecoins are not necessarily linked to the U.S. dollar or legal tender, but can also be targeted at assets or financial products. This is a broadly defined stablecoin. Stablecoins in a broad sense have certain physical assets as a reference, which correspond to certain specific needs in real life. Borrowing the term from the Internet era, it can be called a blockchain application in vertical industries. In the Internet era, the real economy has a process of adding the Internet. In the blockchain era, the process of digitizing assets on the blockchain is called tokenization.
The vitality of the coinless blockchain is very weak, it can only be used as a database, and cannot produce great social effects. Virtual currencies such as Bitcoin are just a new method of gathering wealth: they are transferred to large mine owners through high energy consumption, and transferred to exchanges through high transaction fees. Only tokens are truly vital, because it brings incentives, liquidity, and information flow, and at the same time, it can generate trust in blockchain technology, which is of great help to our real life. Stable currency is a kind of circulation currency in the token economy.
For the commercial implementation of the blockchain, the combination of online financial products and offline consumption rights can make blockchain technology truly have an effect on the industry, and only then can it truly increase its credit. For example, in the current business model, all coupons and stored-value cards purchased by consumers cannot be circulated. Tokenization is to allow these offline physical objects to circulate on the blockchain. If I bought a coupon token for a restaurant when I was on a business trip in the United States, and I returned to China half a year later, the token would be useless to me. what to do? Through the blockchain, I can transfer the pass to my friends, or simply sell it in the exchange. This enables the token to have good liquidity around the world. This change may seem insignificant, but in fact it affects all business models.
In addition to offline physical objects, personal time and credit can all be tokenized and circulated globally. For example, Obama can donate his time tokens to charities, and charities can then sell these tokens to some merchants, who can buy the tokens to ask Obama to give speeches, etc. Although these ideas are very practical, what kind of business model can be successful is still being explored.
When we tokenize all products that can be confirmed, such as bill commitments or consumption rights, the entire market will truly reach the complete market mentioned in economics, which will be of great help to global consumption. A hot issue that the whole world is paying attention to now is that globalization has shown a tendency to retreat. Everyone at this year's Davos was very pessimistic, believing that globalization has led to the intensification of the gap between the rich and the poor. But through blockchain technology, it is possible to reverse this retrogressive momentum and make globalization more convenient.
The essence of blockchain is a credit tool, so it is often connected with money. From the moment of birth, blockchain technology is a very sensitive technology. If there is no certain supervision, there may be great troubles, such as Ponzi schemes. The deceitfulness of a Ponzi scheme is that it can go on for a long time. The largest Ponzi scheme in the history of the United States is the Madoff fraud. The Ponzi scheme with more than 50 billion US dollars has continued to prosper for more than 20 years, and it did not break out until the global financial crisis. Therefore, a momentary success is not necessarily a Ponzi scheme, it has to be tested by time, and more importantly, it depends on its logic.
In the past year, the collapse of cryptocurrencies such as Bitcoin has been frightening, and the implementation of blockchain technology has been slow. So far, the blockchain has not been able to solve the pain points of social performance, but this is also an inevitable law of the development of new things. Today's blockchain is similar to the Internet 20 years ago. Just as we could not foresee today's Internet 20 years ago, the application of blockchain in 20 years may also be something we cannot see now.
From the CEO's hostility to Bitcoin to today's birth of JPMorgan Coin, JPMorgan Chase's understanding of blockchain technology has undergone a complete change in the past two years. This reflects that people's awareness of the blockchain is gradually on the right track. Fortunately, after seeing the true value of the blockchain, JPMorgan Chase finally bravely became the first person to eat crabs. It can be expected that starting with JP Morgan Coin, the adoption of digital assets in the global banking industry will gradually unfold. A blockchain era marked by the rise of stablecoins is on the way, and China is also determined to win it.
In this sense, a small Morgan coin is of great significance.
(The author is a professor of finance at Cheung Kong Graduate School of Business, the founding director of the Department of Finance, a Ph.D. from Yale University, and the founder and CEO of Usechain, the world's first stealth mirror chain; editor: Yuan Man)
