Banks Tried To Kill Crypto And Failed. They’re Embracing Him Now


As with stock and bond prices, Goldman has recently started publishing digital asset prices for large clients such as hedge funds on its Marquee platform, preparing for a time when the bank can support cryptocurrency trading.

In 2019, a unit of JPMorgan called Onyx Introduced JPM CoinA digital currency backed by the dollar running on Quorum, an internal technology that mimics the blockchain structure. However, the bank controlled Quorum, unlike Bitcoin’s decentralized blockchain. It recently turned Quorum into a software startup.

JPMorgan also launched an all-digital system that mimics the traditional “overnight repo” market, where banks exchange short-term US government securities for cash. These transactions used to take more than a day to complete—hence the “overnight” tag—but JPMorgan’s platform reduces risk by doing them in just 15 minutes. It has only three users so far, and two of them are JPMorgan’s own businesses. Goldman became its first external participant this year. If more banks join, JPMorgan could gain control of one of the most important short-term funding markets in the world.

Igor Pejic, an expert on cryptocurrencies, said that JPMorgan’s experiments with blockchain (the technology underlying digital currency transactions) make them digital pioneers ready to profit in the future from the systems they are testing now. “At the end of the day, they are building an infrastructure that they control,” he said.

But soon after JPM Coin went live, regulators began calling, said a person familiar with the matter and not authorized to speak publicly. They were concerned that the movement of coins around the financial system could cause increased risk, as their dependence on the dollar caused a panic and led to the 21st century version of a bank run. The bank had to curtail the scope of use of JPM Coin.

JPM Coin can no longer be used to transfer value outside of JPMorgan’s internal systems. Bank customers can use it to move dollars and other assets back and forth almost instantly inside the bank, but it’s pointless in the wider world.

Regulators have also turned their attention to smaller banks trying to set up cryptocurrency businesses. In 2018, New York-based Quontic Bank, with just $1 billion in assets, sought feedback from the Office of the Currency Supervisor, the top US banking regulator, on its plans to launch a debit card program that gives customers rewards in a specific currency. on Bitcoin.



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