The coin is apparentlydifferent from traditional cryptocurrency, as a JPM Coin always hasa value equivalent to one U.S. dollar and uses JPMorgan's privateblockchain instead of open-access blockchain. (Photo:Shutterstock)

(Bloomberg) –JPMorgan Chase & Co. is turning to crypto to modernize one of its most centralbusinesses.

The biggest U.S. bank said it developed a prototype digital cointhat it plans to use to speed up payments between corporatecustomers, according to a statement Thursday. The token, dubbed JPMCoin, is based on blockchain technology, a decentralized publicledger of transactions that offers more speed because it doesn'trely on a central recordkeeper.

“Many of our clients move money in different ways and they'relooking for a more real-time way to move value around,” UmarFarooq, head of digital treasury services and blockchain, said in an interview.

JPMorgan moves more than $5 trillion in wholesale payments eachday, so even a nascent experiment from the banking giant is poisedto make waves in the cryptocurrency world.While some expertsquestioned the broader impact of a dollar-pegged coin availableonly to JPMorgan clients, others said the bank's involvement lendslegitimacy to an area that's been rocked by volatility andscandal.

The bank started developing JPM Coin about a year ago inresponse to client demand and plans to start testing out possibleuses with a small number of its institutional customers in thecoming months, Farooq said. He declined to name the interestedcompanies.

SWIFT, the air-traffic control system for sending money aroundthe world, has been working on a plan to make overseas transfersmore efficient though a campaign known as the global paymentsinnovation initiative. But banks still sometimes run into troubleclearing cross-border payments in real time, Farooq said. JPM Coincould eliminate that problem by allowing instantaneous valuetransfer, he said.

Japanese lenders including Mitsubishi UFJ Financial Groupstarted working on initiatives such as the MUFG Coin as early as2016. JPMorgan is the first major U.S. bank to publicly introduceits own coin.

The coin has some differences from a traditional cryptocurrency,according to the presentation. Cryptocurrencies use public,open-access blockchain technology and their value is intrinsic tothe coin. A JPM Coin always has a value equivalent to one U.S.dollar and uses JPMorgan's private blockchain.

“JPMorgan is taking a significant step here,'' said AdamGrimsley, a former BlackRock Inc. fixed-income investor whoco-founded London-based crypto hedge fund Prime Factor Capital.“The first bullet in any war is always the most important, and itlooks like this could be the first move in a broader adoption ofblockchain and digital currencies by large institutions.”

Gregory Klumov, chief executive officer and founder ofblockchain company Stasis in Malta, downplayed the scale of theproject.

“They're just taking an existing internal process and making ita little bit faster,” Klumov said. “It doesn't have any of thelong-term, disruptive potential of public blockchains.

JPMorgan previously developed the Interbank Information Network,which is based on the ethereum blockchain. IIN, which has about 157banks in its network from all parts of the globe, is intended toaddress some of the challenges of interbank information-sharing andto help payments reach beneficiaries sooner. JPM Coin is aimed attransferring value rather than information, according to thebank.

CNBC reported the launch of JPM Coin earlier Thursday.

The most famous use of blockchain — cryptocurrencies — has beenstumbling. Bitcoin is down more than 80 percent from its highs inDecember 2017, and, according to JPMorgan calculations, hasrecently been trading below the average cost it takes to mine.

JPMorgan Chief Executive Officer Jamie Dimon famously calledBitcoin a “ fraud” in 2017, though he's repeatedly said he seesmany ways the bank could use blockchain technology.

The bank in January revamped its treasury-services business,combining teams from the consumer and corporate bank to create agroup called wholesale payments that will deal in cash management,payment solutions and merchant services. It's led by TakisGeorgakopoulos.

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