Bahrain has become the latest nation to announce that it is exploring use cases for the JP Morgan blockchain. In an announcement made on January 6, 2021, the country’s central bank announced that it had completed a trial involving the JP Morgan blockchain and digital currency.
Details of the Trial
According to an announcement by Bahrain’s central bank, they partnered with Onyx, the blockchain and crypto arm of JP Morgan Chase to complete a digital payment test. The test involved two other major financial firms, which are ABC Bank, an international bank based in Manama, and Alba, the national aluminum smelter of Bahrain.
During the test, ABC bank made a real-time payment to Alba’s US counterparts using the JPM Coin, which was conducted on the JP Morgan blockchain. JPM Coin is a blockchain-based stablecoin whose value is pegged to the dollar. The Central Bank of Bahrain was responsible for overseeing the trial transaction.
The Trial was a Success
In the announcement, the governor of the central bank, Al Maraj, said that it was a success. He added that it had been done in line with their vision to level emerging technologies to develop the capabilities available to stakeholders in the country’s financial services sector. He added that it was critical for Bahrain to address and possibly eliminate existing inefficiencies in the cross-border payments sector.
The Bahraini central bank first revealed plans for the JPM Coin test in May 2021. At the time, the central bank stated that the trial could potentially grow into the CBDC that the bank was working on.
About the JPM Coin
The JPM Coin is a stablecoin developed by JP Morgan Chase in 2016. It was finally launched in October 2020. It runs on a private enterprise blockchain, instead of a public blockchain like that of Bitcoin. One advantage of this is that it allows the bank to preserve the privacy of its users.
The main benefit of JPM Coin is that it allows the real-time settlement of large transactions across borders. Using traditional routes of settlements, international payments can take days or weeks to process. Besides that, it also helps to eliminate the costs involved in international settlements. Since no third parties are involved, third-party services that take huge percentages per transaction are eliminated.
Another advantage is that auditing transactions become easy since every transaction is recorded on the blockchain. Besides that, the inherent security of blockchains ensures that transactions enjoy a higher degree of security.
Various international financial firms have been taking a serious look at blockchain technology. It offers numerous advantages over existing transaction methods. Despite this, major cross-border transactions are still dominated by fiat transactions. However, that could change in the next few years as major central banks complete trials for the CBDCs and launch wholesale and retail CBDCs. It could ensure that major international transactions involving billions of dollars take place in just minutes, as opposed to the days or weeks that they currently take. While the blockchain was initially developed to secure BTC transactions, its advantages have meant that it has found a home amongst major financial institutions.