What Is JPM Coin and Onyx Blockchain? The permissioned blockchain technology known as Onyx by JPMorgan uses smart contracts to process orders for transactions on its network. It has been the best-permissioned blockchain for financial institutions to transfer funds, assets, and share data since its inception in 2020, following the bank’s JPM Coin.
Formally known as Onyx Coin Systems, Onyx encompasses an entire ecosystem. As of October 2023, JPMorgan reportedly processed about $300 billion worth of JPM Coin transactions from various institutional and corporate clients since its introduction.
What is Onyx?
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Providing various utility services to FinTech companies, banks, and affluent individuals, Onyx is a private (permissioned) blockchain for wholesale use. For users, Onyx provides custodial services, a tokenization platform, a payment rail, clearing and settlement of wholesale transactions, and more. It was created as a multi-purpose financial ecosystem.
Because regulated banks across the US issue them, Blockchain-based accounts treat deposits as “deposit tokens,” which JPMorgan thinks are better than stablecoins. Because they provide commercial banks and other transaction parties with more security, according to the bank, stablecoins are uncontrolled. They could cause problems in the event of a de-pegging or stablecoin run.
Permissioned blockchains are accessed by a select group of users, typically large or medium-sized companies with exceptional security needs and requiring high-speed networks. Users can connect to validate transactions, raise faults, or get status updates; they function as nodes in the network. Also, JPMorgan was the first investment bank to use blockchain technology; its bank-based blockchain offers many benefits, such as deposit tokens, data storage, and asset tokenization.
Onyx Blockchain Main Products
In the introduction, we established that Onyx is an ecosystem offering various products and services to financial institutions and banks. Liink, originally the Interbank Information Network (IIN), is an excellent place to begin.
Liink
Banking and financial institutions can use Liink, a blockchain-based B2B platform, to conduct cross-border transactions and share information in a peer-to-peer manner. This enables them to create a financial roadmap, share insights, and develop a practical plan for their companies.
JPM Coin and Onyx Blockchain: To reduce the possibility of fraud and avoid missing or returned payments (which increase processing costs and expenses). The Liink product enables clients to verify and authorize new accounts for cross-border payments. More than 60 million communications have been handled, and it currently serves 70 clients, some of which are located in Europe.
Onyx Digital Assets
Tokenized versions of client goods can be created using Onyx Digital Assets, Onyx’s asset tokenization platform. This enables a wide variety of applications to be brought to the blockchain. Its excellent infrastructure and enormous resources help tokenization initiatives and web3 app development. Platform apps let customers post collater margins without affecting market movements or use their assets as collateral for intraday borrowing to maximize their money.
JPM Coin
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In 2019, JPMorgan created a stablecoin called JPM Coin. It is insured and has other advantages because it is entirely backed by US dollar reserves and by JPMorgan itself. JPM Coin is restricted to a few US and European clients, like Onyx. The multinational Siemens was the first client to utilize the Euro version of JPM Coin.
However, JPM Coin is not your typical stablecoin. Here are some key takeaways:
- JPM Coin was created on Quorum, a blockchain protocol specialized in developing permissioned networks. It facilitates quick payment transfers and is pegged to the US dollar for stability.
- The main difference between regular stablecoins and JPM Coin is that decentralized finance (DeFi) protocols can use the former for staking in liquidity pools or yield farming, and many of them are not very transparent on their dollar reserves and other backings.
- Meanwhile, JPM Coin is mainly used by JP Morgan’s institutional and corporate clients for fast cross-border transactions and institutional settlements while providing liquidity management. If two parties have an account in JP Morgan, they can use JPM Coin to transfer value.
Onyx vs FedNow: Are They Competitors?
The general public considers FedNow a rival to Onyx and other payment systems. Both systems were designed as payment rails but serve different audiences and have various uses.
Onyx and FedNow share clearing, settlements, and information exchange, but they also differ in important aspects. To begin, interbank transactions can be processed anytime using FedNow, a payment rail available around the clock. JPM Coin and Onyx Blockchain: Financial organizations would embrace and offer this technology to their consumers indirectly since it is exclusive. To facilitate quick and cheap transactions, FedNow employs several technologies, including the FedLine messaging system.
Onyx is a versatile ecosystem that is appropriate for institutions and enterprises globally. The platform enables blockchain-based capabilities for Onyx clients to tokenize financial assets, transport digital assets and goods, and store information centrally, unlike FedNow.
How Does JPM Coin and Onyx Affect Bitcoin?
When compared to Bitcoin and other cryptocurrencies, JPM Coin shows no signs of association. However, Wall Street banks and other financial institutions’ initial rejection of cryptocurrencies and associated technology was hypocritical. Interestingly, they are developing and benefitting from blockchain-based services and asset tokenization, which DeFi has done for a long time.
Institutional clients of JP Morgan are the only ones who can be mentioned while discussing benefits. A rigorous Know Your Customer (KYC) procedure must be met before you apply to join the network.
With enough capacity, such as physical power or funds, just one or two nodes in a centralized network can manipulate state changes, give in to external pressure, or broadcast malicious blocks with erroneous data. Onyx, being constructed by JP Morgan, will certainly not experience those kinds of things.