JPMorgan’s prototype for a digital coin has been heralded by many as a sign of the increasing legitimacy of cryptocurrency. Is it genuine crypto though? Many commentators think not.
The JPM Coin’s value will be pegged to the US dollar, avoiding the volatility that cryptocurrencies are saddled with.
The indications are that the digital coin will be used solely for transactions between JPMorgan and its clients, and will operate on a private network administered by the bank, so is not decentralised in the way cryptocurrencies are.
Vaibhav Kadikar, founder and CEO of decentralised derivatives platform Closecross, says: “JPM Coin will not operate on a public network in the same way that cryptocurrencies such as Bitcoin or Ethereum do.
“The ‘permissioned blockchain’ system JPM Coin uses is essentially a database managed by its owner. If stability, predictability, and usability are what the user values, while still having the transparency provided by blockchain/DLT, then this is an excellent move. But is it a cryptocurrency? I don’t think so.”
However, for crypto-enthusiasts, the sight of financial behemoths embracing aspects of cryptocurrency may well be extremely encouraging.
Chris Flinos, co-founder of Hayvn, a new cryptocurrency exchange aimed at institutional investors, tells PBI, “digital currencies are increasingly embracing regulation and it is encouraging to see major institutional players such as JPMorgan engage.
“There is a perception that cryptocurrencies are the ‘wild west’ of finance but in reality, crypto is increasingly embracing regulation and bridging the gap with the fiat currency eco system. That means tight cyber security, insurance, proper due diligence as well as strict AML and KYC procedures.
“Private banks we speak to tell us that over a third of clients are interested in cryptocurrencies and want to know more about them. We believe that we will increasingly see banks and institutions embrace crypto and lead to its integration into the global financial system.”
Kadikar also sees encouragement in the development despite his reservations. “What they are doing is not a technical innovation by any stretch of the imagination, but it may do wonders for scalable adaption by the masses, which will ultimately still benefit the wider crypto movement.
“If this is a baby step the wider population must take towards a decentralised future then so be it.”
Since JPMorgan’s announcement last week, Bitcoin’s price has been boosted, approaching $4000 for the first time this year, amidst its ongoing bear market.