Analysis Banking News

JPM Coin goes into production, launches JP Morgan Onyx blockchain unit

JP Morgan

Today CNBC reported that JP Morgan’s digital currency JPM Coin is being used commercially by a large technology company for cross border payments. The initiative was first announced on Valentine’s day last year and has also been used during the Monetary Authority of Singapore (MAS) trials of central bank digital currencies (CBDC).

The bank has created a new business, Onyx, as an umbrella for its blockchain and digital currency initiatives.

Takis Georgakopoulos, JP Morgan’s global head of wholesale payments, told CNBC that it set up Onyx because “we believe we are shifting to a period of commercialization of those technologies, moving from research and development to something that can become a real business.”

The CEO of Onyx, which has 100 employees, is Umar Farooq, who has headed up JP Morgan’s blockchain projects to date. The website for the new organization states it houses work on five already published projects. The IIN payment messaging system has been rebranded to Liink. In addition to JPM Coin and Liink, Onyx is the umbrella for the CBDC work with MAS, blockchain debt issuance trial Dromaius, and Quorum, the blockchain protocol recently transferred to ConsenSys. The bank has been involved in numerous other projects where it was not the lead.

Why is Onyx separate?

Farooq’s CEO job title implies that Onyx is a separate company or, at the very least, a new division, which begs the question, why?

The simplest answer would be to create a cool new brand for the sector. That might help to attract staff. It’s no secret that much of the top blockchain talent is attracted to the cryptocurrency sector because of a combination of innovation and the potential for big payoffs. Combined with CEO Jamie Dimon’s notorious comments about Bitcoin, a slight separation could be good for recruiting, and perhaps there’s greater leeway in terms of staff hierarchy and salaries.

Maybe Dimon is still a blockchain doubter and hence wanted to ringfence it or distance it. On the Onyx website Dimon says, “Onyx is at the forefront of a major shift in the financial services industry. This new business unit reflects J.P. Morgan’s commitment to innovation as we continue to build cutting-edge technology that delivers a better, faster and more inclusive financial system.”

But just weeks ago at SIBOS, compared to gushing enthusiasm for cloud and artificial intelligence, Dimon was lukewarm at best about blockchain, saying there has been “very little effective use of it” before warming up after referring to Liink. 

Another possible reason is that digital currencies have messy legal issues. Six months ago, JP Morgan Chase added Coinbase and Gemini Trust as banking clients. That may give them some insight into the volumes of cash flowing through. 

However, separation could also be a disadvantage. There’s the example of the SIX stock exchange, which chose to keep the SIX Digital Exchange (SDX) within the same company to take advantage of existing licenses. 

But the more optimistic perspective is if Onyx is a separate entity, it might be easier to enter into joint ventures or perhaps even take outside investment. Or if it’s a success, be spun out in the future. 

And finally, perhaps its planning something significant, and as yet unannounced which it thinks might have a big impact. In the same way that Libra did.