JPMorgan to Introduce Instant Dollar-Euro FX Settlement Powered by Kinexys Blockchain

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As a researcher who has spent years delving into the complexities of finance, technology, and their intersections, I find myself intrigued by JPMorgan’s latest move towards instant FX settlements using blockchain. Having witnessed the evolution of fintech from the sidelines, it’s fascinating to see traditional banking giants like JPMorgan embracing cutting-edge technologies like blockchain to streamline their operations and offer faster services.

American banking titan JPMorgan Chase & Co is considering launching immediate settlements for USD-EUR foreign exchange (FX) trades through their blockchain platform, previously called Onyx but now known as Kinexys, according to a report by Bloomberg published on Wednesday.

As stated in the document, the system intends to employ JPM Coin, a digitized currency linked to the U.S. dollar, for its transactions. The goal is to simplify the procedure of foreign exchange settlements, which typically take 1-2 days, by providing real-time transaction possibilities for users, thereby expediting the process significantly.

JPMorgan to Launch Instant FX Payments

Initially debuted in 2020 under the name Onyx, Kinexys has witnessed remarkable expansion and currently handles more than $2 billion in transactions every day. Yet, it’s important to note that this amount makes up only a tiny portion of the approximately $10 trillion worth of daily foreign exchange market transactions.

This financial platform enables payments in U.S. dollars and euros for involved entities. JPMorgan intends to incorporate the British pound (pound sterling) once the necessary regulatory permissions are granted. This action aligns with the bank’s strategy to create additional income sources via foreign exchange spreads, along with the fees and liquidity that the platform already generates.

According to Naveen Mallela, global co-head of Kinexys at JPMorgan, the JPM Coin brings in income through transaction fees and by holding balances which provide liquidity. Additionally, we are developing a new source of income from foreign exchange spreads.

Although the advancement of blockchain is notable, its widespread acceptance in the financial industry has been approached with careful consideration. A survey conducted by JPMorgan not long ago indicated that merely 7% of institutional investors considered blockchain as a potentially valuable asset for the next three years, underscoring the ongoing doubt about the technology’s merits.

Not the First

Despite this, it’s anticipated that the introduction of the new FX settlement service will aid JPMorgan in broadening its clientele, encompassing fintech firms, and bring Kinexys a step closer to attaining profitability.

According to Umar Farooq, who is one of the co-heads at JPMorgan Payments, the system has experienced significant expansion, with the number of transactions rising approximately ten times more year after year. However, it might take another three to five years to achieve a state where the costs and revenues of the platform are perfectly balanced.

He further stated that the bank would be in a good position if the platform could scale up “another 10x”, emphasizing that the key goal now is ensuring the platform can handle operations at this expanded level.

At the moment, JPMorgan isn’t the sole financial institution investigating blockchain technology for instant payments. In fact, three Japanese banks – Mitsubishi UFJ Financial Group, Mizuho Financial Group, and Sumitomo Mitsui Financial Group – have announced their intentions to collaborate in September this year to develop a shared settlement system using this innovative technology.

As an analyst, I’m sharing that initially, Japanese banks had announced their intention to commence a pilot project this autumn, involving ten institutional partners hailing from both domestic and foreign markets.

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2024-11-06 15:07