If you can not beat them, join them!
The public enemy, Jamie Dimon, Chairman and CEO of JP Morgan became prominent within the crypto community after calling Bitcoin a "fraud" in Autumn of 2017.
With regulation being in its infancy, the cryptocurrency market suffered brutal slander from major players in the realms of finance, banking, politics and technology. This FUD (fear, uncertainty and doubt) led to heavy bouts of manipulation and sell-offs as these influential figures discredited this disruptive technology.
Fast forward just over a year, Jamie announced the launch of JP Morgan’s ‘cryptocurrency’ (JPM Coin). Whether this apparent case of hypocrisy is merely a strategy to buy time, whilst they create the infrastructure to aid their payment settlements process remains to be seen. We’ve all heard the quote "if you can’t beat them, join them"; and this is exactly what we are witnessing!
Major institutions fixed in traditional methods are being forced to adapt and submit to innovations they are not in the control of. JPM coin is the first Crypto created by a major US bank. The intended use of the coin is to settle payments between JP Morgan’s institutional clientele using the block-chain as a medium to transfer large cross-border payments. Doesn't this sound familiar? It seems as if JP Morgan has been successful in constructing a less sophisticated version of Ripple’s XRP.
The creation of this coin has highlighted how banks and major institutions still have a way to go in terms of understanding what a Cryptocurrency is. JPM coin and some of its operational processes have led to doubts in credibility as actual crypto. The coin is run on a blockchain called Quorum, a closed distributed system, meaning permission is needed to initiate and/or execute any transactions. This alone opposes a fundamental feature of any cryptocurrency; being able to run on an open network. The executive director of the research group Coin Center, Jerry Britto emphasised what he saw as the same distinction between the internet and AOL. With the internet operating on an open system if you wanted to create a website, blog or consumer service you are able to without consulting a governing body for permission. However, AOL operated on a closed network which meant that if you were a publisher, you forced to request permission from the company before being able to do the same.
As well as this, each JPM coin has a value of $1 -this dollar backing resembles the structure of stable coins which aim to reduce volatility. Volatility is another key feature attributed to the crypto market especially until it experiences the full extent of institutional volume. As mentioned prior JPM coin is only available to clients and not accessible for purchase/utilise by the average person. It also must be brought to our attention that with the coin is at the mercy of the dollar. With the 1:1 backing directly to the USD, JPM coin will hope the fiat currency is able to maintain its global integrity and financial strength.
This move by JP Morgan has definitely ruffled a few feathers and we should anticipate competition following suit in due time. Many are concerned as to the impact this will have on existing cryptocurrencies. These concerns can be addressed from two perspectives, the first being that this move puts the likes of Bitcoin, Ethereum and XRP at a disadvantage. This is because JP Morgan represents what they are trying to achieve when it comes to credible global reputation as well as solid regulation infrastructure. On the other hand, this also represents progress in the much awaited institutional and mainstream adoption of cryptocurrencies. If the likes of JP Morgan are now utilising this technology it speaks volumes of its intrinsic value and position within global banking.
What the likes of XRP has in its favour over JPM coin is its neutral standpoint. Being decentralised means that it can be utilised by any party void of governance by a central organisation. Subsequently, rivals such as JP Morgan and Goldman Sachs can transact with each other at no disadvantage. As well as this, through the Inter Ledger Protocol, different organisations with their own blockchain networks can transact with each other. This process will be facilitated by XRP.
Unlike the JPM Coin, the average crypto can be purchased and utilised by the average person which means the wider population can benefit directly from advances in this technology. In a recent interview, Jamie Dimon alluded to JPM coin becoming commercially accessible to regular consumers. In a recent interview, Jamie suggested that his coin could possibly be available for commercial consumption by normal consumers. Many will not buy into crypto alternative solutions provided directly by banks as one of the fundamental purposes of this asset class, in line with Satoshi’s white paper, was to alleviate such institutions of their power. Although this notion is now a farfetched reality, the likes of XRP have made steps in the right direction to create a new level of transparency from banks/financial institutions as well as creating further independence in the form of peer to peer transactions. In addition to this, it is highly unlikely that competition (banks, financial institutions, governments) utilising similar products or existing cryptos will utilise JPM coin.
In conclusion, it is clear that we are approaching a crucial time within the crypto space in terms of regulation. In order for the space to thrive, it will be essential to have the big institutional players on board. However, is absolutely imperative that the core principle of decentralisation remains, and control doesn't fall directly into the hands of certain powers.
Would you buy XRP or JPM, comment below to let us know.