Following on from one of our earlier posts around this theme, this is something to warm the cockles of the blockchain-good-but-bitcoin-bad proponents.
JP Morgan has launched a centralized (private blockchain) stablecoin called JPM coin for faster money transfer services for its clients. JPM coin is JP Morgan’s second attempt at blockchain technology with the Ethereum-inspired Quorum, which is a private blockchain platform for institutions to keep track of financial data. We love stablecoins as you know, and we have spoken about it multiple times, including most recently on the impending explosion in the number of state-controlled or centralized stablecoins. The launch of JPM coin firmly validates our view that the benefits of a having a stablecoin easily outweighs the associated switching costs from the status quo.
We have earlier talked about countries launching stablecoins, in the context of Iran’s crypto rial and in the context of geopolitics. It is a natural logical extension that large multinational corporations that transfer many billions of value across political boundaries on a daily basis look at the blockchain.
The average Fortune 100 corporation spends between $2b -10b (purely back-of-the-envelope) in moving money annually between its own accounts across various geographies. Purely as an internal remittance/money transfer mechanism, stablecoins are a great new way of book-keeping, using blockchain technology. You could save these billions, and if some regulator cries foul at some bank’s bidding, you could actually share some of these savings with them. Banks as rent-seekers will find it tough going forward in the remittances market, unless of course they have the scale to launch their stablecoin, of course. Transferwise etc have already started this disruption process, and blockchain will completely cook their goose.
Much as the ‘establishment’ plays the ostrich digging its head in to the sand, we are clearly returning to an era where money is a consensus reality that is not just one party’s prerogative. The centralized entity that issues this money need not be a central bank, but can be anyone, including a large bank like JP Morgan or Goldman that is trusted by many, or a company like Amazon or Facebook. This is not the crypto-anarchist or libertarian view, this is pragmatic reality. All of the companies above have either announced or have been associated with major cryptocurrency projects. We covered Facebook’s efforts to address remittances with stablecoin sometime ago.
From a utility standpoint, JPM coin can be thought of as an alternative to the US dollar for clients to move money between various JPM accounts. Every JPM coin is backed by a US dollar and because the issuance is completely controlled and the coins are non-tradable, it is reasonable to expect that its value is equal to $1 all the time. In summary, JPM coin could become the de facto payments currency for all JPM clients, a list that includes 80% of the Fortune 500 companies.
Stablecoins are expected to address Bitcoin’s inherent shortcomings and become a reliable currency for payments and also become a medium of exchange. There is a fair bit of criticism directed by the ‘pure’ crypto crowd that is deriding the JPM project as not being a true cryptocurrency. That does not really matter in our opinion. Better to fit the solution to the problem, as JPMorgan is doing with remittances, rather than try to fit problems to solutions, as most of crypto is obsessed with. With the launch of JPM coin, it will be interesting to see how, in the short-run, crypto-native stablecoin projects can rival JP Morgan’s behemoth status and its far-reaching institutional penetration. Projects such as Ripple (that are still struggling at some level to be 10x better than existing solutions) will face an existential crisis. In the long run, as more and more of stablecoin projects come on tap, paradoxically, public blockchains will also become more accepted, which will bode well for cryptocurrencies in general. As we said earlier, the green shoots of spring are growing greener by the day, and will continue to do so as more traditional mainstream institutions launch their projects.
“Crypto M&A at Record High” A record $559 million worth of cryptocurrency-related mergers and acquisitions deals took place in the United States in 2018, according to Pitchbook. The previous record was set in 2010, when $353 million in deals were recorded. Much of the M&A activity was driven by a few high-dollar deals such as the largest U.S. cryptocurrency-related acquisition of all time – Circle’s acquisition of the Poloniex exchange for $400 million in February 2018,. Also last year, Coinbase bought Earn for $120 million, blockchain analytics firm Blockseer was purchased for $14.8 million and bitcoin tax firm Node40 was purchased for $14.7 million.
“Korean Telco to Issue Local Crypto” South Korea’s leading telecommunications company, KT Corporation, has been selected to develop a local cryptocurrency in the South Korean city of Gimpo. The crypto — dubbed “K token” — will reportedly be introduced in April, after a pilot project is carried out next month. The city plans to issue 11 billion won (over $9.7 million) worth of the currency per year, which includes budgets for various social services and development projects.
“Iran Government Engaging Crypto Startups” Iran’s central bank is working with a pair of blockchain startups that are developing what could be the groundwork for a new token ecosystem, according to Coindesk. In January, the Central Bank of Iran unveiled plans for a more comprehensive cryptocurrency program at Tehran’s Electronic Banking and Payments conference. While the new framework – which includes restrictions on accepting or sending bitcoin payments as well as supportive measures for bank-issued cryptocurrencies – is not yet approved, Iranian sources say it’s in the process of becoming law.
“Stablecoins Continue Crypto Pair Dominance”According to Cryptocompare, USDT currently comprises the largest currency pairing by volume for three of the four largest crypto assets by capitalization. In the last 30 days, USDT pairings have comprised more than 67% of total BTC trade, nearly 46% of total ETH trade, and 48% of LTC trade. Aside from the dominance of USDT pairings, other stablecoins are increasingly populating the rankings for top currency pairings. Four of the top 10 BTC pairings by volume are currently stablecoins, with QC ranking fifth with 2.7% of monthly volume, PAX ranking eighth with 0.55%, and USDC ranking 10th with 0.41%.
Crypto-based funds crawl toward mom and pop by Chris Marquette