Banks tried to kill crypto and failed. Now they kiss her (slowly).
Much like stock and bond prices, Goldman recently began posting digital asset prices on its Marquee platform for large clients like hedge funds, bracing for a time when the bank may be able to support cryptocurrency trading.
In 2019, a unit of JPMorgan called Onyx introduced JPM Coin, a dollar-backed digital currency that ran on Quorum, an internal technology that mimicked the structure of the blockchain. But the bank controlled Quorum, unlike Bitcoin’s blockchain, which is decentralized. He recently transformed Quorum into a software start-up.
JPMorgan also launched an all-digital system that mimics the traditional “overnight repo” market, where banks exchange short-term US government debt for cash. Previously, these transactions took longer than a day – hence the label “overnight” – but JPMorgan’s platform completes them in just 15 minutes, reducing risk. It only has three users so far, and two are JPMorgan’s own companies. Goldman became its first outside participant this year. If more banks join, JPMorgan could end up controlling one of the most crucial short-term funding markets in the world.
Igor Pejic, a cryptocurrency expert, said that JPMorgan was one of the few big banks whose experimentation with blockchain – the technology underlying digital currency transactions – made them ready-to-go digital pioneers. profit in the future from the systems they are testing now because, he said, “they are putting in place an infrastructure that they ultimately control.”
But soon after JPM Coin went live, regulators started calling, said a person familiar with the matter who was not authorized to speak in public. They were concerned that the movement of coins through the financial system would cause a buildup of risk as they were tied to the dollar, triggering a panic and leading to the 21st century version of a bank run. The bank had to reduce the scope of using JPM Coin.
As of now, JPM Coin cannot be used to transfer value outside of JPMorgan’s internal systems. Bank customers can use it to move dollars and other assets inside the bank almost instantly, but it doesn’t make sense in the world.
Regulators have also looked into smaller banks trying to set up cryptocurrency businesses. In 2018, the New York-based Quontic Bank, with just $ 1 billion in assets, asked America’s main banking regulator, the Office of the Comptroller of the Currency, to tell it about plans to launch a program. debit card offering customers rewards denominated in Bitcoin.