The first cryptocurrency created by a major U.S. bank is here — and it's from J.P. Morgan Chase. The lender moves more than $6 trillion around the world every day for corporations in its massive wholesale payments business. In trials set to start in a few months, a tiny fraction of that will happen over something called "JPM Coin," the digital token created by engineers at the New York-based bank to instantly settle payments between clients. J.P. Morgan is preparing for a future in which parts of the essential underpinning of global capitalism, from cross-border payments to corporate debt issuance, move to the blockchain. That's the database technology made famous by its first application, bitcoin. But in order for that future to happen, the bank needed a way to transfer money at the dizzying speed that those smart contracts closed, rather than relying on old technology like wire transfers. "So anything that currently exists in the world, as that moves onto the blockchain, this would be the payment leg for that transaction," said Umar Farooq, head of J.P. Morgan's blockchain projects. "The applications are frankly quite endless; anything where you have a distributed ledger which involves corporations or institutions can use this." For some, J.P. Morgan's new currency may come as an unexpected development for a technology that rose from the wreckage of the financial crisis and was supposed to disrupt the established banking world.

When the international payments are tested, it will be one of the first real-world applications for a cryptocurrency in banking. The industry has mostly shunned the asset class as too risky. Last year, J.P. Morgan and two other lenders banned the purchase of bitcoins by credit card customers. And Goldman Sachs reportedly shelved plans to create a bitcoin trading desk after exploring the idea.

Dimon bashed bitcoin

Though holders of digital currencies may seize on the news that a major financial institution is issuing its own crypto as bullish for the asset class, retail investors will probably never get to own a JPM Coin. Unlike bitcoin, only big institutional clients of J.P. Morgan that have undergone regulatory checks, like corporations, banks and broker-dealers can use the tokens.

There are other key differences between the bank's crypto and bitcoin, which J.P. Morgan CEO Jamie Dimon has bashed as a fraud that won't end well for its investors. (To be clear, he and his managers have consistently said that blockchain, as well as digital currencies that were regulated, hold promise.)



Each JPM Coin is redeemable for a single U.S. dollar, so its value shouldn't fluctuate, similar in concept to so-called stablecoins. Clients will be issued the coins after depositing dollars at the bank; after using the tokens for a payment or security purchase on the blockchain, the bank destroys the coins and gives clients back a commensurate number of dollars.

Real-time settlement