After a busy day, I sat down to have a late lunch at 3 PM on Thursday, and I saw a Whatsapp message pop up – and I stood up from my chair saying “Ohhh Ehhmmm Geee”. That was my reaction when I heard about the news of the JPM Coin. Of all the banks, JP Morgan led by Jamie Dimon had to be the first mover to launch their asset backed crypto. It is less than 2 years since Jamie Dimon called Bitcoin a big fraud.

Will this bring back some decorum into the crypto world? Will this kill Ripple’s XRP? My head is abuzz with all these questions, so bear with me as I manage/struggle to lay them out.

The crypto world can do with some positive news and sanity as there is a sense of the crypto winter coming to an end. As much as I loved to hear the news, and was glad for the crypto industry as a whole, I felt for some of the early adopters of the technology. There is a good chance that we will see a BarcCoin, CitiCoin, GSCoin, and so on, with similar working models. There is more than a chance that we will see some existing players disappear. Let us quickly visit the salient features of the JPM Coin model.

• It will use the Quorum Blockchain developed by JPM. It provides for
  high speed and high throughput processing of private transactions within a permissioned group of known participants
• It will be a stable coin, whose value will be always $1 USD – so market volatility linked with Cryptos is mitigated.
• It will be used for wholesale payments that JP Morgan processes, estimated at ~$6 Trillion per day.
• The network can be a private or even a centralised network permissioned by JPM.

With real time cross border B2B payments as the core use case, JPM Coin may create some challenges for Swift. Last year, Swift announced that its GPI technology that has had good feedback from its banking customers.
GPI technology that let banks see where their payments were at all times, and that came with rules around response and confirmation times.

However, the challenge for the newcomers (then) that kept Swift going was the mutual KYC requirement from the regulators, which was harder using a DLT payment mode. And GPI let banks see where their money was at all times. Assume a London based bank is sending money to a bank in Mumbai, there may be a couple of correspondent banks in between. The London bank can see where the money is, and stay on top of any delays, issues etc., They can also stay on top of the Service Level Agreements (SLAs) that the intermediaries offer.

With a crypto based approach, the transfer will be instantaneous without any need for correspondent banks as long as regulatory and relationship hurdles are overcome.

Ripple and XRP have had their challenges in gaining adoption from key banking players. One of the key reasons why cryptocurrencies couldn’t be used for cross border B2B payments is because of the market volatility of the cryptos. With a stablecoin like JPM Coin, that fundamental issue has been addressed.

Also, with the banking and corporate relationships that JPM commands, most of their counterparties would be better off being part of the network. The JPM’s interbank network has about 157 global banks, and adoption should be pretty quick once the piloting is successful. Although the underlying Quorum blockchain is based on Ethereum, it offers both private and public transactions capabilities. So banks and corporates on the network will have privacy if they choose/need it.

However, the real pain hits them (corporates) when a bunch of tier 1 banks launch their own stable coins. This space has just started to get interesting, and we should see an avalanche of similar offerings from global banks.

Arunkumar Krishnakumar is a Venture Capital investor at Green Shores Capital focusing on Inclusion and a podcast host.

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