IBM Says Banks Consider Following JPMorgan Into Digital Currency

(Bloomberg) -- International Business Machines Corp., a provider of technology for creating digital currency, said at least two “major U.S. banks” are considering whether to follow JPMorgan Chase & Co.’s lead in issuing a coin.

Jesse Lund, IBM’s vice president of blockchain, said that the company has held initial discussions with the two lenders on issuing a so-called stablecoin -- a digital token that is pegged 1:1 to an established currency like the U.S. dollar. JPMorgan, the largest U.S. bank by assets, announced in February that it would issue a digital currency tied to the dollar, called JPM Coin.

“We have received interest on the heels of JPM Coin,” Lund said in a phone interview. The two other banks “reached out to us after that announcement.” He declined to name the banks.

Digital coins can enable instantaneous transfers of funds between institutional accounts, reducing settlement times and making it easier to move money internationally. JPMorgan, which moves more than $5 trillion in wholesale payments each day, said its coin will use its own private blockchain to speed payments among corporate customers.

IBM said it is also working with six non-U.S. banks on digital currencies. Among them are BNK Financial Group Inc.’s Busan Bank in South Korea, and in the Philippines, Rizal Commercial Banking Corp., which is expected to issue a stablecoin in the second quarter, Lund said. The banks are awaiting approvals from regulators.

Coins issued by the international banks can run on IBM’s new Blockchain World Wire network, which was introduced on Monday. The digital currencies can be used to settle transactions between customers of different banks. By loaning the coins, banks can earn interest income and charge transaction fees, Lund said.

“There’s a new revenue opportunity for banks,” he said. “Banks are now starting to catch the buzz.”

Stablecoins have become popular in the past year as wild drops in cryptocurrency prices prompted traders to seek out safer alternatives. That’s led to the rise of stablecoin king Tether, as well as the launch of a slew of other stablecoins for retail and corporate users.

To contact the reporter on this story: Olga Kharif in Portland at okharif@bloomberg.net

To contact the editors responsible for this story: Nick Turner at nturner7@bloomberg.net, Dan Reichl, Steve Dickson

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