JP Morgan already enables tokenized U.S. dollar deposits with JPM Coin. Now it plans to enable blockchain-based Euro deposits ‘soon’ said Basek Toprak, head of Coin Systems at Onyx by JP Morgan.
On another related topic, JP Morgan sees a payment opportunity for NFTs. “The technology today is not friendly enough for mass adoption,” said Brody Mulderig, who covers Fintech at JP Morgan, talking at the Crypto Assets conference.
He stepped through all the hoops some users have to jump through to buy an NFT. If they’re not already involved in crypto, the easy part is transferring money onto a crypto exchange. But then users have to transfer that to a self-custodial wallet, buy hardware to make sure it’s secure, and then buy the NFT. They also must be wary of phishing scams and the risk of losing the seed phrase to their wallet.
Some consumer-focused NFT applications already remove friction by accepting card payments for NFTs. Dapper Labs is one, and Mulderig mentioned Sorare, the Softbank-backed fantasy sports NFT platform, based out of France, which now has deals with numerous soccer leagues, the MLB, NBA and PGA Tour.
JP Morgan is clearly chatting to some music NFT platforms about enabling fiat payments. It’s also looking at the potential of web3 more broadly, which it considers to include all applications that aren’t directly related to finance.
Most blockchain financial applications sit under JP Morgan’s Onyx division. This includes Onyx Digital Assets with an intraday DLT repo application, Liink for messaging around conventional payments and JPM Coin. It’s also experimenting with using JPM Coin on a public blockchain as part of Project Guardian, its Singapore DeFi experiments with the Monetary Authority of Singapore.
On the topic of JPM Coin, Toprak emphasized the difference between programmable payments, which already exist, and blockchain-based programmable money. For corporates, many banks already offer trigger payments unrelated to blockchain.
Tokenized money on a blockchain creates efficiencies because it acts as both the record of value, enables the money movement and supports programmability. That contrasts with the current status of money, which exists electronically in a bank database with separate payment rails to transfer money. This creates inefficiencies in moving money between the ledger and the rails.
Blockchain eliminates reconciliations because both parties have access to the shared ledger.
Whereas in the past, one company might push a payment or another request a payment, with blockchain programmable money, the two parties mutually agree on what data will trigger a transfer ahead of time.
She sees port payments as a good example, where a ship coming into port shouldn’t pay port fees too early because it might change its route. If it leaves the payment too late, offloading goods could be delayed. Instead, by using GPS, the payment timing can be optimized and automated.
Another JP Morgan executive Veronique Steiner spoke about the value of automation to corporate treasurers. Over weekends and holidays, treasurers must keep excess liquidity buffers, and automation could make a big difference. That applies to triggers relating to the point of service, delivery of goods, movement of FX, or margin calls.
A point not discussed is the richness enabled by smart contract programmability. So we’d expect programmable money to be able to deal with more complex situations compared to simple trigger payments. On the other hand, it must be kept reasonably simple to avoid mistakes.
Coin System’s Toprak described a path toward public blockchain payments as an expanding circle. At the center, JPM Coin enables payments via a shared ledger within the bank. JP Morgan is also part of Partior, a Singapore joint venture for interbank blockchain payments, so a shared ledger between banks.
“The future is universal ledgers,” she said. “We are slowly getting there. Web3, public blockchain, these will be possible over time. (We’re) Taking small but important steps.”
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