JPMorgan Chase & Co.'s customers in the US, Europe and Japan are interested in its digital currency project JPM Coin, which aims to accelerate the trading of bonds and other securities.
Umar Farooq, head of digital financial services and blockchain at JPMorgan Chase, said JPM Coin could deliver “instant” delivery of bonds on the blockchain platform. In an interview in Japan, he said:
“We believe that over time, in a period of 5 to 20 years, many securities will be digitized or tokenized.”
The JPM Coin, launched in February this year, is linked to the US dollar and uses the bank's private blockchain. JPMorgan Chase said at the time that the company had been testing the tokens to enable institutional customers to make instant payments.
Using blockchains to speed up transaction settlement is not a new concept: stock exchanges in Hong Kong, Australia and Canada are exploring this possibility. Earlier this month, Facebook announced plans to introduce a cryptocurrency called Libra, which will be supported by assets including bank deposits.
According to Farooq, in bond trading, JPM Coin will help traders deliver securities in exchange for cash. Buyers can purchase JPM Coin in advance and deposit it in JP Morgan Chase's deposit account, and the seller's bond can also exist in the form of tokens. The transaction is then completed by a computer program on the blockchain platform.
This can save a lot of time. Ohsaki, chief equity strategist at Bank of America Merrill Lynch in Tokyo, said that at present, sellers of Japanese government bonds usually need two days to pass the bonds online to buyers in exchange for cash.
Farooq said that JP Morgan Chase may begin testing JPM Coin with some customers to understand how it can help customers quickly transfer money. He added that testing may be conducted around the end of the year if approved by the relevant regulatory authorities.