JPMorgan: Launch of “JPM Coin” and Digital Asset Branch “Onyx” Will Force Wall Street to Embrace Blockchain

JPMorgan's Launch of Crypto Shifts Wall Street Sentiment of Digital Assets-Sarson Funds-Cryptocurrency Financial Advisor

JPMorgan's Launch of Crypto Shifts Wall Street Sentiment of Digital Assets-Sarson Funds-Cryptocurrency Financial Advisor

On Oct. 27th, JPMorgan announced the launch of their long-awaited “JPM Coin,” along with Onyx, their new branch for digital asset operations and custody services.

JPMorgan’s move, while contradicting to CEO Jamie Dimon’s 2017 claim that Bitcoin is a “fraud,” strategically places the bank along the cutting edge of financial technology, giving JP Morgan a strong positioning as the new age of decentralized financial services arises.

The launch of the JPM Coin along with Onyx is more than just JPMorgan jumping on the blockchain bandwagon. Rather, the launch of these services is indicative of the bank’s belief in the ever-expanding potential and use cases of blockchain technology to be a profitable and cost efficient approach to the future of financial services.

Takis Georgakopoulos, JPMorgan’s global head of wholesale payments, stated in an interview last week about blockchain’s profitability, “We are launching Onyx because we believe we are shifting to a period of commercialization of those technologies, moving from research and development to something that can become a real business.”

Similarly, the bank plans on utilizing the permissionless efficiency of blockchain technology as it looks to build out cost effective solutions to risky interbank transfers and cross-border payments. Blockchain technology, as we all know, is no stranger to near immediate global value transfers with just the tap of a finger. To assist in their effort to rebuild the traditional flow of money, JPMorgan has launched Liink, a P2P network built on the Onyx blockchain platform to automatically validate payments and assist in quick, secure transactions that remove the risk of third party interference and lag time.

As the crypto ecosystem enters into the era of widespread adoption, banks must future-proof themselves by recognizing trends in financial technology and embracing fintech momentum. In this day and age, it is imperative that banks alter their outdated approach to financial services and adapt a new, more efficient approach to banking: harnessing the power of blockchain technology. As JPMorgan pioneers Wall Street’s blockchain presence, financial services companies will soon be forced to follow suit in order to stay afloat in an increasingly decentralized world.

By Liam McDonald

Peak Stable Coin: Did JP Morgan Just Top-Tick the Stable Coin Market?

By John Sarson, Managing Partner, Sarson Funds

The announced launch of JPM Coin (JPMC) last week did more than just complete an immutable reversal in Jamie Dimon’s public cryptocurrency stance. Unveiling their non-public stable value coin for internal money transfers, JP Morgan’s hopeful embrace of the blockchain revolution may have marked the moment when the market witnessed “Peak Stable Coin”.

As a bank too big to fail, embracing the future means committing to an uncomfortable level of uncertainty. Despite forward-thinking banks like Broadridge Financial enjoying a 4 year head start in delivering blockchain powered operational efficiencies, JP Morgan’s courageous decision to make an attempt at evolving almost reaches the commendable threshold.

What is a Stable Coin?

A class of digital assets, stable coins behave in a manner similar to an ETF. Like an ETF, new shares get issued and withdrawn from the public markets in an attempt to replicate the performance and stability of a specific fiat currency pair, usually the US Dollar (USD).

Stable coins claim a matched issuance basis of 1:1 with fiat holdings held as collateral in a traditional bank account.

Why Stable Coins Matter

Not all cryptocurrencies participated in the bloodletting that was 2018. As souring public sentiment and plunging prices captured headlines throughout the year, one class of cryptocurrency enjoyed a banner year – the stable coins.

Tether (USDT) leads the stable coin segment with $2.02 Billion in total assets. Launched in 2015, Tether effectively “tethers” it’s price to the US dollar at $1.00 per digital token. The introduction of Tether offered crypto market participants a new investment option within their cryptocurrency exchanges. It gave crypto speculators the option to move assets out of plunging cryptocurrency markets without making a trip back to their traditional fiat currency bank – something few crypto traders with large taxable gains in 2017 where very excited to do.

Throughout the various sell-offs of 2018, stable coins proved very useful for investors for looking to temporarily exit cryptocurrency market volatility. Assets invested in Tether (USDT) grew from $320 Million in September 2017 to $2.8 BILLION by September of 2018.

Tether’s enormous growth, which occurred despite high profile concerns about accounting irregularities, prompted a slew of additional market entrants such as USD Coin (USDC) (launched in October in a collaboration between Coinbase and Goldman Sachs backed cryptocurrency exchange Circle), True USD (TUSD) and the Winklevoss twin’s Paxos Standard Token (PAX), the only boasting a charter from the New York State Department of Financial Services).

The Future for Stable Value Coins?

Despite occasional use by some market participants in 2018, questions remain over the future importance and usefulness of stable value coins. Sound cryptocurrency asset managers should try to avoid using stable coins. These digital assets introduce unnecessary counterparty risk and execution volatility into the investment process – something we seek to avoid. Stable value coins also lack insurance and do not pay interest.

Useful as a 2018 stop gap measure while improving and opening crypto-to-fiat, we predict reduced future appetite for stable coins as these traditional and well developed channels possess notable maturity.

Realizing the Regulatory Reckoning

Cryptocurrency speculators and tax dodgers sour the stable coin outlook further. Hoping that cryptocurrency gains would remain off the tax man’s radar until the money returned to the bank, these market manipulators have now sobered to the reality that digital asset income shielding will not work in their favor.

The blockchain’s immutability delivers transparency and cryptocurrency traders now more readily understand the ease of discovery for activity on a US-based cryptocurrency exchange by financial and regulatory authorities. This April 15th the tax man cometh to crypto, stable value coins or not.

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