The JPM coin, the newly announced JP Morgan cryptocurrency, is being seen as a key step in the adoption of the technology in the mainstream banking industry, however for some in the industry it is a cause for deep concern.

Announced yesterday, the JP Morgan cryptocurrency will begin being used this year, but only for internal applications. Pegged 1:1 to the US dollar, the JPM Coin will be used by the banking giant to provide dramatically faster transfers between accounts than with traditional methods.

“The JPM Coin was built on Quorum, an enterprise iteration of the Ethereum blockchain, that enables the instantaneous transfer of payments between institutional accounts,” explained Andrew Keys, former investment banker and co-founder of blockchain venture capital advisory company ConsenSys Capital.

“While JP Morgan is the first US bank to issue a blockchain-based digital coin that represents the US dollar, it is not the first time large financial institutions have used an enterprise implementation of the Ethereum blockchain to tokenize fiat currency.”

JPM Coin concerns from the cryptocurrency industry

While many have welcomed the news as a sign that cryptocurrency is being embraced by mainstream banking, for others it is a sign of an industry corrupting the technology for their own purposes.

“This is an interesting development as JP Morgan has not been the biggest advocate of Bitcoin or cryptocurrency in the past. The firm has now created its own currency but has seemingly missed out on a lot of what crypto stands for,” said Daniel Howitt, director of cryptocurrency security platform Recap.

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“As the currency is centralised and is only to be used internally, it is only controlled by one party, which goes against any kind of freedom and spirit of the original concept and founding values of crypto.”

Howitt added that being pegged 1:1 to the dollar was already common among a number of cryptocurrencies, such as USDC, Tether and Dai, but argued that the JPM Coin’s centralised management was an issue.

“The approach that they’ve taken leaves the currency open to be censored, manipulated and controlled by JP Morgan, whereas cryptocurrencies such as Bitcoin are designed to be decentralised, ensuring they cannot be controlled by a single party,” he said.

“The cryptocurrency they’ve created also doesn’t give JP Morgan any benefits that couldn’t be achieved by a traditional software stack with a centralised database.”

Others saw the announcement of more of a stunt than anything meaningful from the banking giant.

“It seems suspiciously like a PR stunt to me. The whole idea seems pointless from a practical perspective, in that there will be little utility for JP Morgan’s staff and, in any case, it is unclear why a blockchain is needed to create an internal payment system,” said Alexander Mann, investor at venture capital firm Concentric.

“In my view it defeats the main purpose of cryptocurrencies, which is to be decentralised and outside the control of centralised institutions, so as to be censorship resistant.”

Can a JP Morgan cryptocurrency normalise blockchain in finance?

The announcement represents a significant change of attitude towards cryptocurrencies from the company, with JP Morgan head Jamie Dimon dismissing Bitcoin as a “fraud” less than six months ago.

“Bitcoin and cryptocurrencies in general were created to bypass the banking industry. The initial idea was to send money fast and with a very low cost using the blockchain technology,” said Tomasz Wisniewski, chief analyst for Forex and CFD trading platform Alpari.

“When JP Morgan CEO Jamie Dimon downplayed the Bitcoin I was not very surprised: cryptocurrencies could have been perceived as a threat by the banking industry ‘dinosaurs’.”

However, this change of heart, argues Wisniewski, is a sign that the industry is waking up to the earning potential of the technology.

“Banks are here to make money and also ‘if you cannot fight with them, join them’. As cryptos are decentralised and they grew big, there was no way to block their development. That is probably why JP Morgan decided to create their own crypto,” he said.

“They are smart people and they understood that the blockchain technology, and the whole idea behind it, is huge and can be a real game-changer for the whole industry.”

For others, it shows that the technology is now entering maturity.

“With JPM Coin hopefully the tables are turning for digital currencies and we can really start to see the benefits that blockchain technology can bring to the financial world,” said Jason Hart, CTO of data protection at digital security company Gemalto.

“By focusing on a set use case, JP Morgan can control the currency and work closely with regulators to ensure that it fully meets their requirements, before taking it mainstream.”