J.P. Morgan has become the first US bank to create and test a digital coin representing a fiat currency.

The JPM Coin is based on blockchain technology, enabling the instantaneous transfer of payments between institutional accounts.

Umar Farooq, the bank’s head of digital treasury services and blockchain, explained that JPM Coin is a digital coin representing US Dollars held in designated accounts at JPMorgan Chase, so when one client sends money to another over the blockchain, JPM Coins are transferred and instantaneously redeemed for the equivalent amount, reducing the typical settlement time.

Over time, JPM Coin will be extended to other major currencies, the bank stated, adding that the product and technology capabilities are currency agnostic.

“We have always believed in the potential of blockchain technology and we are supportive of cryptocurrencies as long as they are properly controlled and regulated,” read a statement from J.P. Morgan.

“As a globally regulated bank, we believe we have a unique opportunity to develop the capability in a responsible way with the oversight of our regulators – ultimately, we believe that JPM Coin can yield significant benefits for blockchain applications by reducing clients’ counterparty and settlement risk, decreasing capital requirements and enabling instant value transfer.”

The bank was keen to stress that JPM Coin is currently a prototype, and that as it moves towards production, regulators will be engaged to solicit feedback and any necessary approvals.

It is being tested with small number of J.P. Morgan’s institutional clients, with plans to expand the pilot program later this year.

“We don’t have plans to make this available to individuals at this stage,” read the statement, adding: “That said, the cost-savings and efficiency benefits would extend to the end customers of our institutional clients.”

JPM Coin will be issued on Quorum Blockchain and subsequently extended to other platforms.

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