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JPMorgan Introduces Its Own Digital Coin With Institutions in Mind

JPMorgan Introduces Its Own Digital Coin with Institutions in Mind

Major US-based multinational investment bank JPMorgan announced yesterday that it has launched a digital coin that will be backed by the US dollar.

A major breakthrough for cryptocurrencies which had for a long time been blighted in some circles as being untrustworthy, or so would some think. As a matter of fact, JPMorgan was among those in 2017 who ridiculed cryptocurrency and specifically called Bitcoin a fraud. Although its perspective on the subject of blockchain industry as well as properly controlled and regulated cryptocurrencies was that it held promise. Now, it stands as the first major US bank creating a digital coin and one among others in the traditional banking industry to create a real-world application of blockchain technology.

Consequently, this development has aroused some controversial sentiments within the crypto community. According to MarketWatch, Jerry Brito – executive director at Coin Center told the news outlet that the JPM coin isn’t a cryptocurrency but an in-house-built payment system. The bank did clarify on the differences between its digital coin and cryptocurrencies, however, it is a popular sentiment that any product built on the blockchain is assumed to come with the tag ‘cryptocurrency’.

As explained on the bank’s website, it appears that the JPM coin isn’t a legal tender, but a digital coin backed by the US dollar – not a stablecoin either – stored in designated accounts of JPMorgan Chase. The bank said that when one client sends money to another over the blockchain, JPM Coins are transferred and instantaneously redeemed for the equivalent amount of US dollars, reducing the typical settlement time.

The JPM coin will only be used between its institutional clients as the core purpose of the coin is to save time for inter-bank/institution settlements, leveraging the robustness of the blockchain as opposed to legacy systems of money transfers. Accordingly, the coin will not be available to individuals, however, the bank says that the rippling effect in the efficiency of money transfer will confer certain benefits to individuals.

The bank may not stop at the digital coin alone, it said in its news release that with respect to its other businesses like custody or clearing and settlement, “it’s still too early to assess the ultimate impact of blockchain,” and it intends to further explore areas of applicability as it works with clients around the world. Perhaps, it may join the list of financial institutions proposing to offer custody solutions in an attempt to cater to institutional investors willing to join the crypto derivative market once the system is well regulated.

Blockchain-related trends in the banking industry have been growing of late with expanding use cases specific to interfacing with the technology to facilitate money transfers between financial institutions. As reported in December last year, Signature Bank’s Signet may have been the first regulator-approved blockchain-based payment system developed by a bank. It was designed to eliminate third parties and process payments faster between the bank’s clients.

Saudi Arabia and the UAE have been discussing plans on developing a blockchain-based cross-border payment system for inter-bank relations.

Moreover, the subject of a state-backed central bank digital currency (CBDC) has been frequently discussed in many banking circles. However, the views on such development have been rather polarized. Perhaps, this step made by JPMorgan will further facilitate the adoption of different blockchain use cases for other banks as they race for inclusion into the emerging market.

 

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Swiss Bank Vontobel Launches Digital Asset Custody Vault

Swiss Private Bank Vontobel Launches Compliant Digital Asset Custody Vault Solution

Switzerland-based investment bank Vontobel announced today that it is launching a custody solution with a digital asset vault service for its customers.

Per the announcement, this will allow financial intermediaries such as banks and asset managers to offer their customers a more secure and easy way to buy, hold and transfer their digital assets, within an unprecedented infrastructural standard. The product features Hardware Security Module (HSM) technology embedded in the bank’s infrastructure.

One of the largest financial custody providers in Switzerland, the bank touts the new Digital Asset Vault business solution as the first in the world offering “industry-standard quality standards within the established and regulated environment”. Some of the perks include granting owners of the digital asset direct access to holdings with exclusive privilege to their private keys.

Custody solutions are currently being explored by many financial institutions, where an emerging client base built on the economy of digital assets will have a flexible channel to securely manage their holdings. Head of Vontobel Investment Banking Roger Studer said, “Digital Asset Vault is a logical evolution.”

Choi Kyung-pil, Director of the Center for Future Finance Research at the Korea Institute of Finance has also said that “traditional assets are in danger too, and the custody market is in place”.

With the expected influx of institutional investments, the need for such integrated services becomes ever necessary, with security being the most essential requisite.

Other key figures in the crypto industry such as Coinbase and BitGo have also ventured into the custodial business, aiming at servicing sophisticated investors.

Switzerland continues to shape its blockchain and digital asset industry to become one of the most conducive environments for its development. Its most recent activity includes adapting its existing laws to accommodate blockchain. Moreover, newly-elected president Ueli Maurer, who has been supportive of the development of the industry while being finance minister, has filled crypto adopters in the country with hopes of more positive outcomes.

 

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Major Bank in Russia Announces Partnership with Energy Giant to Propagate Blockchain

The largest majority state-owned bank in Russia, Sberbank, revealed details of a partnership with major state-run power company Rosseti, which includes the promotion of emerging technologies such as blockchain.

Together, the pair plan to collaborate on a number of projects with the joint aims of advancing blockchain in Russia, and developing their own internal expertise. A press release detailing the partnerships reads that they will work on educational projects and research trials with one another.

The strategic partnership is a significant move from Russia as it continues to pursue a leading place in the nascent technological field through its various company arms. In this instance, it seems to be using the collaboration as a means of sharing information and progress.

Part of the agreement states that Sberbank will supply Rosseti with a consultant to increase general efficiency and performance, alongside access to the bank’s ”innovative laboratory developments” and its full ecosystem of products.

Apart from sharing its blockchain data, Sberbank will provide Rosseti with its experience and developments in the field of the internet of things (IoT), business process automation, robotics, VR / AR, big data, and artificial intelligence (AI).

Sberbank was one of two financial institutions behind the launch of Russia’s first cryptocurrency investment fund in July 2018, that came as part of the Russian central bank’s ‘regulatory sandbox’ initiatives. Bitcoin, Bitcoin Cash, Ethereum and Litecoin will form an investment portfolio of digital financial assets for the banks to experiment with.

Bitcoin News reported last week on the disappointment from experts surrounding the current content of Russia’s long-awaited cryptocurrency regulatory bills.

Artem Tolkachev, chairman of the Russian Blockchain community claimed that as it stands now, the bill leaves much room for inefficiencies, in part due to the fact that crowdfunding section and the Russian Civil Code were written by different entities, and the contents conflict with each other.

 

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International Bank Wire Fees 65,000% Costlier Than Bitcoin

International bank wire fees are 65,000% costlier than a Bitcoin transaction, according to MyBankTracker, which averaged the fees of 18 banks in the United States. Domestic wire transfers within the United States are 42,000% costlier than a Bitcoin transaction.

As of this writing on 19 September 2018, Bitcoin’s transaction fee averages to USD 0.10, which is what is used to calculate these percentage figures. Bitcoin transaction fees can be as high as USD 1 for the most rapid confirmation time when there is heavy load but even at 1 satoshi per byte, which translates to USD 0.01, Bitcoin transactions will always be confirmed eventually.

At today’s price and assuming the smallest possible size of input, it only takes USD 0.01 of fees to send as much Bitcoin as you want anywhere in the world, even if it’s USD 10 billion. Further, Bitcoin transactions show up in a receiver’s wallet instantly, although unconfirmed, and most online wallets like Blockchain.com allow instant spending without confirmations.

Compare this to a bank wire, which costs USD 49 on average for sending internationally, and USD 16 for receiving an international transaction, yielding a total average international wire fee of USD 65. For international wires, it can take up to 24 hours for the receiver to get the money, typically several days.

Domestically, it costs USD 29 to send a bank wire and USD 13 to receive a bank wire, yielding a total of USD 29 on average for domestic bank wires. Domestic bank wires are usually much quicker than international bank wires, sometimes only tanking a few minutes, but they still are not instant.

Additionally, bank wires are processed by centralized banks, who have the power to freeze and reverse bank wires. There are entire countries blacklisted from receiving bank wires from the United States, like Iran, North Korea, and Venezuela. Bitcoin is decentralized, so it can be sent anywhere in the world and can never be frozen. Bitcoin is immutable, meaning a payment can never be reversed.

 

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Study: Blockchain Can Save Banks $27 Billion per Year by 2030

Market intelligence firm Juniper Research has published the results of its blockchain study, with the findings showing financial institutions are set to save USD 27 billion annually by 2030 should they utilize the technology.

The cost reduction for cross-border settlement transactions is shown to be reduced by over 11% when deployed on blockchain.

#Blockchain deployments to save #Banks more than $27bn annually by 2030, with cost reductions not just in #Payments processing and reconciliation, but in treasury operations and compliance. #Fintech #Banking

Read more in our press release: https://t.co/pNWXeopbjO pic.twitter.com/pYk2PYsISQ

— Juniper Research (@juniperresearch) August 1, 2018

The Future of Blockchain: Key Vertical Opportunities & Deployment Strategies 2018-2030 study also investigates alternative areas where the technology could create more cost-effective practices, including in treasury operations. The savings applicable for banking departments varies; in areas of compliance, automated money laundering checks via blockchain could create a 50% price decrease in just a few years.

Internal banking legacy systems that will most likely be required to run alongside any blockchain tech services may, however, cause the savings process to take several years to be fully implemented. Estimated service cost savings are not expected to reach USD 1 million per annum until 2024.