JPMorgan shifts towards FX spreads as part of its strategy to generate additional revenue for the Kinexys network.
United States-based banking giant JPMorgan Chase & Co is planning to introduce instant settlements for dollar-euro foreign exchange (FX) transactions via its blockchain platform Kinexys, which was initially known as Onyx, Bloomberg reported Wednesday.
According to the report, the platform will use JPM Coin, a digital token pegged to the US dollar, for the transactions. This initiative aims to streamline the process of foreign exchange settlements, which traditionally can take one to two days, by offering real-time processing opportunities for users.
JPMorgan to Launch Instant FX Payments
Launched in 2020 as Onyx, Kinexys has experienced significant growth, now processing over $2 billion in daily transactions. However, the figure represents a fraction of the $10 trillion daily foreign exchange market transactions.
The platform facilitates dollar and euro-denominated payments for participating institutions, although JPMorgan plans to add the British pound (sterling) once regulatory approval is obtained. The move is part of the bank’s strategy to generate new revenue streams through foreign exchange spreads, in addition to the fees and liquidity already produced by the platform.
“If you look at JPM Coin, we generate revenues from fees, we also generate revenue from liquidity from holding those balances. We’re coming up with a third revenue stream from FX spreads,” said Naveen Mallela, global co-head of Kinexys at JPMorgan.
Despite this progressive development, the broader adoption of blockchain within the financial sector has been met with caution. A recent survey by JPMorgan earlier this year revealed that only 7% of institutional traders viewed blockchain as a promising asset for the next three years, highlighting the lingering skepticism surrounding the technology.
Not the First
Nevertheless, the rollout of the new FX settlement service is expected to help JPMorgan expand its client base, including fintech companies, while bringing Kinexys closer to achieving profitability.
Umar Farooq,co-head of JPMorgan Payments, said that while the system has seen remarkable growth, with the number of transactions increasing tenfold year-over-year, it could take another three to five years to balance the cost and revenue of the platform fully.
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.
Meanwhile, JPMorgan is not the only bank exploring blockchain’s potential for instant payments. In September this year, three banks in Japan, Mitsubishi UFJ Financial Group, Mizuho Financial Group, and Sumitomo Mitsui Financial Group, revealed plans to work together to introduce a unified settlement system.
At the time, the Japanese banks said they would kick start the trial this fall with ten institutional participants from both Japan and international markets.
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