On Wednesday, the Central Bank of Bahrain announced that a trial of JP Morgan’s JPM Coin digital currency system had been completed successfully. First announced in May, the tests involved commercial Bank ABC and its client Aluminium Bahrain (ALBA). ALBA used the enterprise blockchain system for real-time US Dollar payments with U.S. counterparties that are also JP Morgan bank account holders. The central bank oversaw the trial.
The JPM Coin system tokenizes money held in JP Morgan bank accounts and is not a stablecoin. Digital currency payments are direct, sidestepping the need for intermediary or correspondent banks. However, that wouldn’t be needed with all parties banking at the same bank. By digitizing the currency, it becomes programmable, giving corporates greater flexibility for the timing and conditions that trigger payments.
“The pilot was tested using US dollars, and this technology will allow us to scale-up our existing offering and introduce more currencies in the future,” said Sael Al Waary, Deputy Group CEO of Bank ABC. “We envisage major changes across the world with digital currencies, which will play a critical role in enabling future digital economies.”
When the tests were first announced in May, the central bank commented it would consider the system for central bank digital currency (CBDC) trials. While that statement was not repeated, the central bank expressed satisfaction with the system’s ability to eliminate inefficiencies that exist with cross border payments.
A recent research report from JP Morgan and Oliver Wyman predicted that CBDC could save $100 billion in cross border payment costs. JP Morgan’s Onyx was involved in a cross border CBDC trial between France and Singapore.
Other central banks in the region have participated in CBDC trials. In 2020, the UAE and Saudi central banks shared results of a joint CBDC experiment, Project Aber. The UAE is also a participant in the M-CBDC Bridge project, which includes the central banks of Thailand, Hong Kong and China. This is a wholesale CBDC initiative for interbank cross border payments rather than a retail CBDC.
Meanwhile, JP Morgan’s Onyx blockchain division is extending its activities. While the JPM Coin system launched in 2020, the users were undisclosed. In late December 2021, it was revealed that Siemens is using the platform for automated payments. Other Onyx initiatives include Liink for addressing queries about conventional cross border payments, particularly for AML, and the JP Morgan Repo network.
JP Morgan is also an investor in Partior, a joint venture with DBS Bank and Temasek which is a developing a wholesale multi-currency payment system in Singapore. Additionally, Partior is a participant in Project Dunbar, the cross border M-CBDC trial involving Singapore, Australia, South Africa and Malaysia.