A cryptocurrency mining rig composed of Asus Strix machines operates at the SberBit mining ‘hotel’ in Moscow, Russia. (Photographer: Andrey Rudakov/Bloomberg)

JPMorgan's Crypto Coin Puts Ripple's Relevance in Question

(Bloomberg) -- The newest cryptocurrency on the block has been used in just one trial transaction and it’s already being hailed as a game changer for digital assets.

JPM Coin, a so-called stable coin JPMorgan Chase & Co. plans for its clients to use in cross-border payments, is a direct threat to one of the most visible blockchain companies, Ripple, and the digital currency used in its products, according to Tom Shaughnessy, principal at Delphi Digital, a crypto research boutique in New York. XRP, which can be used to facilitate faster, lower cost international payments, is the third most valuable cryptocurrency by market value at about $12.6 billion.

Ripple has made a name for itself with grand ambitions of replacing the Swift network used by banks, individuals and businesses to send and receive money. In JPMorgan it meets a challenger who moves more than $5 trillion in wholesale payments each day, meaning even a small experiment from the banking giant could have a big impact.

“This is a huge slap in the face for Ripple,’’ said Shaughnessy. “Ripple’s target market is cross-border payments and remittances and now JPMorgan’s effort is a direct threat.’’

JPMorgan's Crypto Coin Puts Ripple's Relevance in Question

Brad Garlinghouse, Ripple’s chief executive, downplayed the impact.

“As predicted, banks are changing their tune on crypto,” Garlinghouse wrote in a Tweet. “But this JPM project misses the point –- introducing a closed network today is like launching AOL after Netscape’s IPO. 2 years later, and bank coins still aren’t the answer.”

San Francisco-based Ripple says it has more than 200 banks and payment providers on its RippleNet network, including Japan’s Mitsubishi UFJ Financial Group Inc. and Standard Chartered Plc, according to its website.

“JPM’s project is much more evolutionary than revolutionary -- it is utilizing a private, permissioned blockchain technology called Quorum, which is much closer to a Google Sheet than a Bitcoin,” said Travis Kling, the Los Angeles-based founder of crypto hedge fund Ikigai Asset Management. “The project is clearly competing directly with Ripple Labs and their centralized cryptocurrency XRP.”

The JPM coin may prosper because, unlike XRP, its value is pegged to the dollar, making it a stable medium of exchange. XRP traded above $3 in early 2018 and now trades for around 30 cents.

“The JPM Coin is a stable coin whereas XRP is anything but stable,’’ said Shaughnessy. “That’s going to be a very contentious point for banks who don’t want the currency in which they make payments to be volatile.”

©2019 Bloomberg L.P.