US investment bank JP Morgan has created a cryptocurrency to help settle payments between clients in its wholesale payments business. JPM Coin is the first digital currency to be backed by a major US bank.
The crypto-currency, which runs on blockchain technology, has been used successfully to move money between the bank and a client account. JP Morgan says it sees potential in using digital coins to reduce risk and enable instant transfers.
Although JP Morgan’s chief executive Jamie Dimon has publicly criticised Bitcoin – the first cryptocurrency in existence – on several occasions, the bank says it has always “believed in the potential of blockchain technology”.
“We are supportive of crypto-currencies as long as they are properly controlled and regulated,” Umar Farooq, JP Morgan’s head of Digital Treasury Services and Blockchain, wrote in an online Q&A page.
Virtual currencies can be used to pay for things in the real world, such as a hotel room, food or even a house. Digital tokens are held in online wallets, and can be sent anonymously between users.
For this reason, crypto-currencies are attractive to people who want to make illegal purchases on the Dark Web – a part of the internet that is not indexed by search engines.