JPMorgan Chase's digital currency JPM Coin is being used commercially for the first time this week to send round-the-clock cross-border payments, the bank said Tuesday. The user is a large international technology company the bank won't name — other clients are being onboarded, the bank said — but the development comes as JPMorgan appears to be pushing its blockchain efforts into their next phase.
The bank this week rebranded its Interbank Information Network as Liink. The network counts more than 400 banks — including four of Canada's six largest — as clients, and created a 100-employee business unit, Onyx, to oversee Liink, JPM Coin and other ventures previously under the purview of the Blockchain Center of Excellence.
"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," Takis Georgakopoulos, JPMorgan Chase's global head of wholesale payments, told CNBC.
Liink, whose Quorum-based applications focus on troubleshooting issues with cross-border payments, launched two new products Wednesday. Confirm, which allows users to validate account information before sending payments to banks in other countries, aims to reduce the cost of errors and potentially cut down on fraud. A second product, Format, ensures payments adhere to the correct currency and regulatory requirements.
Liink participants with payments expertise in particular regions can build an application on top of the network and deploy it globally. That peer-to-peer functionality could serve as a differentiator, said Christine Moy, Liink's lead executive.
"We have paid particular focus to ensuring that our Liink participants have the opportunity to create new revenue streams," she told American Banker.
Moy told Coindesk the aim of Liink is not to replace the Society for Worldwide Interbank Financial Telecommunications network, but to complement it.
Liink is not open-source like Quorum or R3's Corda network, but JPMorgan is encouraging collaboration within the network, as well as expanding it to fintechs and other companies in the ecosystem.
Beyond Liink, Onyx is looking at a project — months away from commercial launch, according to newly named Onyx CEO Umar Farooq — that would revamp the processing of paper checks from a system that now relies on people to physically handle mail at lockboxes to one that allows banks to exchange digital information associated with a check.
"Using a version of blockchain with the participants being the main issuers of checks and the main operators of lockboxes, it's possible we can save 75% of the total cost for the industry today, and make checks available in a matter of minutes as opposed to days," Georgakopoulos told CNBC.
JPMorgan also is considering creating separate payment rails for central banks that want to launch their own digital currencies. "If we are able to develop a model that works, we think the probability of adoption becomes very high," Georgakopoulos said, pointing to Singapore and China as examples of nations looking for use cases.
The moves come at a time of heightened action and interest in the digital currency sphere. The Federal Reserve Bank of Boston announced in August it is partnering with researchers at the Massachusetts Institute of Technology to build and test a hypothetical central bank digital currency. Despite that, Federal Reserve Chairman Jerome Powell said last week the Fed hasn't "made a decision to issue one," adding that more work needs to be done, along with "extensive" public consultation with stakeholders.
Private companies are a bit more bullish on the prospect. PayPal announced last week it would let its U.S. account holders buy, sell and hold cryptocurrency in their PayPal digital wallets beginning in the coming weeks, and use digital coins to pay for purchases at the 26 million merchants on the company's payment network.
JPMorgan, too, has taken several steps this year to build out — or spin off — its blockchain presence. It extended banking services this spring to crypto currency exchanges Coinbase and Gemini — three years after the bank's CEO, Jamie Dimon, called bitcoin "a fraud" and said he would fire "in a second" anyone at JPMorgan found to be trading in the digital currency.
The bank in August sold Quorum, the blockchain platform it developed, to the Brooklyn, New York-based technology firm ConsenSys. JPMorgan uses Quorum to power the unit now known as Liink, which debuted as a pilot program in 2017. The bank also used Quorum to test JPM Coin.
Venture capital funding for blockchain startups dropped more than 30% last year, CB Insights reported. But Farooq said excitement over the platform's potential hasn't waned.
"If you think about blockchain, we are either somewhere in the trough of disillusionment or just beyond that on the [Gartner] hype curve," Farooq told CNBC. "That's why at JPMorgan we've been relatively quiet about it until we were ready to scale it and commercialize it."
