Last week, banking giant JP Morgan Chase announced their latest innovation: JPM Coin. A cryptocurrency stablecoin which would allow the clients of the bank to transfer their funds in a faster and cost efficient way. However, ever since the company announced this - a major controversy erupted. Many in tech aren’t even acknowledging JPM Coin to be a cryptocurrency, while there are some who are hailing it as the ‘XRP Killer’.
Let us take a closer look at this controversy that has erupted around JP Morgan’s latest crypto effort.
Is JP Morgan’s JPM Coin Not a ‘Real’ Cryptocurrency?
One of the first names to attack the JPM Coin’s status of a ‘cryptocurrency’ was Nick Szabo, who has been an active voice in the world of cryptocurrencies for several years. Szabo claimed that the JPM Coin is quite similar to the Petro (a cryptocurrency released by the government of Venezuela). He added that this currency beats the very concept of having cryptocurrencies because of ‘trust minimization’.
The biggest argument against state-backed and bank-backed cryptocurrencies is that they beat the very purpose of having a cryptocurrency in the first place. A defining feature of cryptocurrencies is that they are decentralized in nature. However, if a bank or a government is administering them, it beats the point of creating a cryptocurrency in the first place.
A number of passionate crypto-supporters bashed the JPM Coin on social media calling it out for its centralized, closed and limited nature. Anthony Pompliano, who is another major voice in the world of cryptocurrencies - pointed out that with JP Morgan launching their own “cryptocurrency”, soon other banks will also follow on their footsteps - and every bank will have its own cryptocurrency limited to its own clients - these small, close-ended cryptocurrencies are against the original idea. Pompliano event went ahead to tweet:
The most popular token for money laundering this year will be JPM Coin
Is JPM Coin a Threat to Ripple (XRP)?
Bloomberg’s Joe Weisenthal, the co-host of ‘What’d you miss’ podcast commented that the arrival of bank-backed cryptocurrencies might just put Ripple out of business! Weisenthal commented:
If it turns out that the Blockchain/Coin framework turns out to be a good one for banks transferring money around, then the JPM Coin should absolutely obliterate Ripple.
Think about it, let’s say you were in the business of transferring money, why would you take on the exchange rate volatility risk associated with having Ripple as a bridge currency, when you could have a fiat-coin backed by JPMorgan. No brainer.
The idea behind Ripple is that of creating a blockchain network for banks and financial institutions to easily transfer money between one another. Ripple’s RippleNet already has over a hundred financial institutions under its wing - and the company is pushing hard to expand. However, with JPM Coin (and with other banks launching their own coin in the future), Ripple’s plans might just take a hit.
Ripple CEO Brad Garlinghouse, however, isn’t really worried. He said that bank-backed cryptocurrencies are still not the answer. In his words, it is like launching AOL after Netscape’s IPO. He said that while this was expected, these bank-backed crypto-coins are not the answer.
Stay tuned with us at Cryptoground for more updates from the world of cryptocurrencies and the blockchain technology!