Banking News

JP Morgan adds major cryptocurrency exchanges as banking clients

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JPMorgan Chase has opened bank accounts for cryptocurrency exchanges Coinbase and Gemini Trust, a Wall Street Journal report said. The largest U.S. bank has previously been critical of cryptocurrency, and its willingness to do business with exchanges could motivate other banks to provide banking services. The question is whether this exposes the banking system to cryptocurrency risks.

California-based Coinbase is one of the biggest digital currency exchanges in the U.S. and currently has over 30 million users, with over $150 billion traded on the platform to date. Gemini Trust, started by Tyler and Cameron Winklevoss, is not as large but is seen by some as the most conservative or institutional. It offers a crypto wallet, trading, custody and clearing solutions. 

With this new relationship with JPMorgan, which has more than $3 trillion in total assets, the crypto exchanges will be able to accept account to account payments. Until now, when customers provided bank details, the exchanges relied on payment processors. 

JP Morgan is only providing cash management facilities to the exchanges.

Both of the cryptocurrency exchanges are licensed.

When various organizations around the world, such as the Bank for International Settlements (BIS) have reviewed the risk of cryptocurrencies, to date, they have deemed them to have minimal impact on the financial system. That’s because firstly, the current scale of cryptocurrencies is relatively small. And secondly, financial institutions have limited exposure. If these JP Morgan accounts trigger a ramp up in exposure, it could signal a shift.

Unlike cryptocurrencies, global stablecoins such as Libra are viewed as systemically risky because they could quickly gain widespread traction.

Meanwhile, JPMorgan has its JPM Coin, which it is developing for instant settlement of blockchain transactions. The BIS recently classified it as a “wholesale stablecoin” alongside Fnality, which plans to operate a payments network backed by central bank deposits and formerly know as the Utility Settlement Coin (USC). 

Among other blockchain projects, JPMorgan has developed the Quorum blockchain, its enterprise version of Ethereum. It is also operating a blockchain payments messaging network for banking peers.