JPMorgan and Santander projects are just the start for crypto

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I admit it. I’m not a bitcoin billionaire. Like a lot of other people, I waited too long and jumped in too late. My FOMO moment came sometime in 2017, when bitcoin was surging. I finally broke down and bought some. Hey, maybe my few thousand dollars would turn into millions.

Alas, that didn’t happen. But I’m still bullish on blockchain, the distributed ledger that underpins bitcoin and all other cryptocurrencies. You can’t not be bullish, really, as long as you focus on the transformational nature of the blockchain technology and ignore all the hype and froth that surrounds it.

Think of it this way. Blockchain today is roughly in the same place that the internet was circa 2000, when the air went out of the dotcom bubble. Yes, a lot of dotcoms died. But the internet survived and thrived. Blockchain will follow a similar path. Cryptocurrencies will come and go but blockchain will flourish, because it has game-changing use cases that will fundamentally improve the way financial transactions get done. Here are three of them.
Last year, Santander Bank, the world’s ninth-largest financial services company, partnered with Ripple to upgrade its cross-border payments process and make it easier for Santander customers to send and receive money internationally. The solution uses blockchain-based technology to provide a fast, simple and secure way for customers to transfer money across borders.

This is intriguing. In today's world, making international payments requires traversing a web of legacy payment rails, like ACH, wire transfer and Swift. Unfortunately, these are the most common and widespread ways to reach customers globally. These involve currency conversion, verification and a lot of other friction. Remittances are costly and can take days. Blockchain lays the foundation for a better way. When customers send a transfer via blockchain, they can bypass the traditional friction to transfer funds that can easily be changed to local currency at the destination. The key benefits are real-time payment, better exchange rates and lower transaction costs.

Blockchain is not enough to enable payment transactions, however. You need a cryptocurrency or token, but not like the wildly fluctuating currencies like bitcoin or Ethereum. That’s why the new JPM Coin, a stable-value coin announced recently by JPMorgan, is a step in the right direction. A stable-value coin combines the electronic trading benefits of crypto currencies along with the stability of those good ol' fashioned fiat currencies (greenbacks, quid, yen, you name it).

JPM Coin is the first cryptocurrency created by a U.S. bank and is a fast and efficient means of moving money. JPMorgan’s wholesale payments business, which moves more than $6 trillion a day around the world for corporations, will soon launch a trial program in which a small number of these payments will be transmitted in JPM Coin. The benefit for clients of the bank is the ability to settle payments transparently and instantaneously at any time of the day or night.

Another high-potential use case for crypto is vendor-to-vendor payments. How will it work? Let’s say I’m a couture sweater maker and I buy fleece from an alpaca farm in Peru. With blockchain, I can pay the farmer instantaneously in crypto when the fleece ships. The transaction is recorded on the blockchain in black and white. There can be no dispute. This is a case where a distributed ledger really makes sense, especially if payments are cross-border and made with a stablecoin, a currency that maintains its value and is easily convertible to different fiat currencies.

But right now, if I’m a sweater maker buying from that farmer in Peru, there are a lot of steps in my payment process. I send a purchase order to the farm, the farmer then sends my fleece, then an invoice and finally I send the payment. There are many transactions but no real-time, indisputable record of them. Blockchain is better. It’s an independent, transparent ledger that shows payments made and payments received right away.

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Blockchain Cryptocurrencies Digital payments JPMorgan Chase Santander ISO and agent