As JPM Coin launches, Citi reflects on decision to cancel Citicoin

In the wake of JPMorgan’s February launch of its Ethereum-based JPM Coin digital currency, Citi let it be known why it had killed the Citicoin project its innovation lab discussed—but never formally announced—back in 2015.

As Gulru Atak, Citi’s treasury and trade solutions Dublin lab and innovation head, told CoinDesk, the technology had potential but her predecessors weren’t convinced it was the most effective or efficient way of improving cross-border payment processing.

“We actually decided to make meaningful improvements in the existing rails by leveraging the payments ecosystem and within that ecosystem, we are considering the fintechs as well or the regulators around the world as well, including SWIFT,” Atak said. SWIFT is the legacy interbank payment processor. In January, it announced that it was working with enterprise blockchain provider R3 to open the new SWIFT global payments innovation (GPI) platform to blockchain-based trading platforms.

One of the barriers to a blockchain-based interbank payment system is getting the world’s banks to participate, Atak explained, pointing out that 46-year-old SWIFT took a long time to sign up its more than 11,000 institutions in more than 200 countries.

While the JPM Coin isn’t called a stablecoin, it essentially acts that way as it will be valued at par with the U.S. dollar. As Modern Consensus reported, the JPM Coin will initially be used for international payments between large corporations, the buying and selling securities by large institutional investors, and to cover large corporations’ day-to-day payments. It will also be a permissioned enterprise blockchain, so only JPMorgan-approved institutional clients will have access to the JPM Coin.

In addition to JPMorgan, IBM announced at Money 2020 Asia in Singapore on March 18 that six international banks had signed up to launch their own stablecoins on the Stellar-powered IBM Blockchain World Wire. These include Banco Bradesco in Brazil, Bank Busan in South Korea, and Rizal Commercial Banking Corporation (RCBC) in the Philippines. Each will use its own national fiat currency.

Forty-four international banks already support payments on Blockchain World Wire. BWW is currently supported by 44 banks in 72 countries, issuing payments in 47 fiat currencies. The other three unnamed banks will issue stablecoins based on the euro and Indonesian rupiah.

Using stablecoins built on the Stellar (XLM) blockchain for point-to-point, cross-border payments is simpler than the traditional payment-reconciliation system—SWIFT—and streamlines the process by eliminating intermediaries, which in turn reduces financial institutions’ costs and can improve settlement times to seconds, IBM said in its announcement.

“We’ve created a new type of payment network designed to accelerate remittances and transform cross-border payments to facilitate the movement of money in countries that need it most,” added Marie Wieck, general manager of IBM Blockchain. “By creating a network where financial institutions support multiple digital assets, we expect to spur innovation and improve financial inclusion worldwide.”

Creating a stablecoin based on the Philippine peso “presents a tremendous opportunity to transform and enhance our payment infrastructure,” agreed Manny T. Narcisco, first senior vice-president of RCBC. “We’re focused on innovation that adds value for our customers.”