While cryptocurrency investors ride the wave of green occurring across the market, with BTC soaring above $4000 to establish a new high in valuation for 2019, a debate is beginning to form over the exact nature of the JPM Coin.
JP Morgan Chase, who has been characterized as adversarial to cryptocurrency given the remarks of CEO Jamie Dimon, surprised the financial world with the announcement of the JPM Coin. Exact details on the coin are still forthcoming, but two things are clear: the currency will function as a stablecoin pegged to the value of one U.S. Dollar and the functionality will be extremely similar to Ripple and the xRapid service utilizing XRP.
Ripple, the blockchain-based startup behind XRP, has been at the heart of the cryptocurrency-financial tech merger by pushing its xRapid and payment protocol for cross-border transactions. Using XRP for liquidity, the company offers advantages to banks and clients looking to send money around the globe in a substantial improvement in speed and cost over the industry standard.
However, with the announcement of the JPM Coin–which will fill the same intermediary role as Ripple for JP Morgan clients–some analysts are left questioning whether the decision constitutes a direct challenge to XRP. According to a series of articles published on Forbes, the latter is becoming less likely.
As Forbes has put it, JPM Coin constitutes less of a cryptocurrency (in the traditional sense) than a digital tool or asset that will be used under very specific conditions. The labeling of “stablecoin” is in reference solely to the pegging of the coin’s value to the price-stable dollar. In reality, the intrinsic value of a single JPM Coin is irrelevant, as the currency–at least by what we know so far about it–is not intended to be trade, bought or sold on an open market.
Therefore the JPM Coin is not really a “cryptocurrency” or a stablecoin, and will offer little in the way of competition for XRP. However, it does provide direct competition for Ripple and the company’s payment platform, which could put indirect pressure on XRP.
For one, Ripple and the JPM Coin are tackling the same problem: inefficient, slow, expensive cross border transactions that are becoming increasingly archaic in the modern digital landscape. As opposed to adopting Ripple’s protocol, JP Morgan’s announcement gives clear indication that the bank has turned in-house to solve the issue of increasingly global transactions. While JP Morgan’s decision does not immediately mean that all banks and financial institutions will follow suit, thereby eliminating the marketplace for Ripple, it does show that the latter is possible.
XRP enters the equation by two indirect relationships to Ripple. To start, the currency is used directly for liquidity in the xRapid service, meaning that xRapid adoption and use promotes XRP use. In addition, the coin is still tied to the fortunes of Ripple, at least by way of investor sentiment. Ripple has done a commendable job of removing itself from the framework of XRP, thereby promoting decentralization and making the third largest cryptocurrency more faithful to the values of the industry.
However, it’s hard not to imagine some overlap between the fortune of the XRP currency and that of Ripple the company–at least in the foreseeable future. If Ripple fails on a global scale, it could produce ramifications for the valuation of XRP and the security of its investment base. But, while JP Morgan may demonstrate a shift on Wall Street, Ripple has yet to tap into the full extent of its potential customer base. The company has rightfully targeted developing countries and unbanked populations, such as those comprising India and Brazil, as areas with the most to gain from their payment protocol.