In 2017, JPMorgan Chase CEO Jamie Dimon called Bitcoin a fraud and stated that any JPMorgan trader dealing in cryptocurrency would be “fired in a second.” However, just two years later, JPMorgan became the first major American bank to launch its own digital token, the JPM Coin. It also became the first major American bank to offer Bitcoin and other cryptocurrency funds to its wealth management clients.
JPMorgan’s dramatic shift in attitude towards cryptocurrencies continues. In this article, we use Blockdata to reveal JPMorgan’s strategic focus in the blockchain and cryptocurrency sectors, with the bank’s recent investments, acquisitions, and partnerships highlighting this.
Although a mature bank, JPMorgan has always sought to explore how modern technology can impact financial services early on. This is evident in its investment and innovation strategy. JPMorgan’s association with blockchain dates back to 2015.
In 2015, the bank first entered the blockchain field by forming the R3 consortium with eight banks, including BBVA and Barclays. In February 2016, JPMorgan launched a trial run of blockchain technology, mainly to test the bank’s ability to cope with the increasing competition from online lenders and payment systems using blockchain and cryptocurrencies. In October of the same year, the bank launched its own blockchain, Quorum, an internally developed private version of the Ethereum network.
In April 2017, JPMorgan ended its collaboration with the R3 consortium to pursue a separate technological goal. In 2018, JPMorgan launched Dromaius, a prototype mainly for testing the use of Ethereum blockchain technology. During this period, the bank was experimenting with how blockchain could help reduce costs and ensure that transactions within the capital market were easier.
In 2019, JPMorgan launched JPM Coin, a digital token representing legal tender (i.e., 1 coin equals 1 US dollar), using blockchain technology to transfer payments between institutional clients. The token operates on the Quorum blockchain and has been approved by JPMorgan for use by specific large institutional investors and clients. JPM Coin can support advanced payment types, such as PvP (payment versus payment), DvP (delivery versus payment), machine-to-machine payments, and traditional cross-border payments. JPM Coin has three practical uses:
- Providing real-time payment transactions for large international corporate clients at any time of the day
- Secure transactions
- Allowing large companies that use JPMorgan’s treasury services to replace the US dollars they hold in their subsidiaries around the world
JPMorgan hopes to expand beyond stablecoins. In May 2020, it began offering cash management services and decided to process US dollar-based transactions for Coinbase and Gemini clients in the United States.
In August 2020, it sold its blockchain Quorum to ConsenSys. Shortly after, in October of that year, the bank launched a second blockchain, Onyx, to transition to digital currencies in the financial services industry. Onyx is a blockchain-based system that meets the following needs:
- Its first product is JP Morgan’s Liink, an integrated network that allows institutions to seamlessly share payment-related data
- The second product is the next-generation coin system, enabling corporate clients to use a multi-bank shared ledger for programmable, real-time, multi-currency payments (currently under development and not available as a live product)
- The third on the list is the Onyx digital asset blockchain network, designed to exchange value between different types of digital assets
- Finally, there is the blockchain startup department, fully committed to introducing new application, network, and shared platform technologies
JPMorgan is also one of the first major American banks to offer its wealth management clients Bitcoin and other cryptocurrency funds.
In March 2021, JPMorgan launched the Cryptocurrency Exposure Basket, a debt instrument that provides cryptocurrency exposure through 11 Bitcoin proxy stocks. Although it does not invest directly in cryptocurrencies, it includes positions in a total of 11 companies exposed to cryptocurrencies, including MicroStrategy, Block (Square), Riot Blockchain, and NVIDIA.
A few months later, in July 2021, it became the first American bank to offer six cryptocurrency funds to its main wealth management clients to add Bitcoin and other cryptocurrencies to their portfolios.
In January, the Central Bank of Bahrain completed testing with Onyx on JPM Coin, allowing ABC Bank to launch real-time payment services for Aluminum Bahrain (ALBA) in the United States.
In February 2022, JPMorgan became the first bank to establish a presence in the metaverse by launching the Onyx lounge, a blockchain-based 3D virtual world browser in Decentraland. The bank plans to leverage the potential growth opportunities in the metaverse through its virtual presence.
In May 2022, JPMorgan tested the use of blockchain for collateral settlement. The first transaction took place on May 20th when two entities of JPMorgan transferred tokenized representations of Black Rock Inc.’s money market fund shares.
