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make no mistake that this is a fundamentally new era where all of a sudden these corporations are going to use this type of synthetic currency as a key part of how they do business given how much we've seen just native organic decentralized adoption of stable coins this year it's hard for me to imagine that these technologies won't end up finding their way into some very different use cases than currently jpmorgan executives are thinking about welcome back to the breakdown with me nlw it's a daily podcast on macro bitcoin and the big picture powershifts remaking our world the breakdown is sponsored by crypto.com nexo.io an elliptic and produced and distributed by coindesk what's going on guys it is tuesday october 27th and today we are talking about the private currency era as jpmorgan launches jpm coin first up however let's do the brief first on the brief today a stock slump as bitcoin surges yesterday was the s p 500's worst loss in a month and today it is down as well meanwhile in europe stocks europe is heading towards the lowest close since june so what's going on well it's not that complicated u.s consumer confidence is worse than forecast according to a report that came out yesterday and it's not hard to see why covet numbers are on the rise and investors are concerned about the return of lockdowns in many parts of europe we're already seeing different types of strategic smaller lockdowns so all of these things are creating a context where people are very rationally it seems to me at least holding on to resources that they might otherwise be spending which halts the general flow of our consumer economy so there's that going on but it doesn't seem to be impacting bitcoin in fact bitcoin is going the other direction from a bloomberg daily rap piece yesterday quote bitcoin rose towards 13 500 approaching levels not seen since just after the burst of the cryptocurrency market bubble almost three years ago there's a lot of reasons for that some of which we're going to get into a show sometime this week about election outcomes in bitcoin but for now pretty cool to see it heading in the opposite direction of stocks next up on the brief today a second stockpiling wave this gets into this consumer confidence conversation as well demand for items like baking goods have spiked 3 400 from a year earlier in the three weeks through october 13th for some context there was a six 000 percentage jump during the first wave of covet 19 lockdowns so we're not quite that high but still pretty remarkable grocers also aren't able to get everything they want still raleigh's is a chain with 130 locations that's only filling an average of 70 to 75 percent of its orders which again while better than the 40 it was filling at the peak of the early crisis it's still low and many of these companies are expecting things to get worse now if there's a saving grace here it's that companies who are in these markets have been spending millions to expand their production line so it's unlikely that we'll see really severe shortages at any point last up on the brief today the swiss central bank and the bank for international settlements plan to test a digital currency this year this was revealed by benoit corey who was one of the pieces i read on long read sunday this week he is for those who don't know the bank for international settlements innovation person effectively he revealed this at the bun summit in shanghai and basically said that they are planning on issuing a proof of concept stage currency by the end of 2020 which will pave the way for a retail cbdc thereafter the swiss central bank and the bis have been collaborating for about a year at this point starting in october of 2019 and this digital currency leads perfectly to our main topic the private currency era money has been the provenance of the government for a very long time in fact the u.s has made it quite illegal for corporations to print their own money back in the olden days there was a thing called company script that was effectively a credit against accrued wages often when people lived in company towns or camps so think about the period during westward expansion people could use this company's script at the company's store so they could use it for their supplies and what have you companies could charge outrageous markups at these stores and basically make people entirely dependent on them right if you're giving them a currency that's only useful in the company's store it doesn't really allow people to make different decisions about their money often as well even though you could theoretically exchange it for real cash the rates weren't really fair in many cases now at some points during the depression many people turned to script local governments were even often paying their employees in script all of this became illegal however under the fair labor standards act of 1938 and it's never been legal since now let's zoom up to the bitcoin era bitcoin launches but it's not really clear just what the hell it is it also doesn't have a company per se so there's really not a force trying to get it to shut down under this sort of private currency idea there are of course plenty of regulators who don't like it but it's usually about its use with criminals not about a private company issuing money [Music] this episode is brought to you by crypto.com the crypto super app that lets you buy earn and spend crypto all in one place and earn up to 8.5 per year on your bitcoin download the crypto.com app now to see the interest rates you could be earning on btc and more than 20 other coins once in the app you can apply for the crypto.com metal card which pays you up to eight percent cashback instantly on all purchases reserve yours in the crypto.com app today in this crisis many investors aim to keep and grow their digital assets others seek to maximize the yield on their cash nexo allows you to achieve exactly these two goals the company offers instant crypto 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own money in the way that they might have been in the olden days but then libra comes along and it completely changes things all of a sudden it's not just a knowable company talking about printing their own currency it's a company that the us government is already hugely scared of democrats are convinced that it is too powerful and can be manipulated for politics i.e the whole russian bots thing republicans are convinced that it has too much power to censor conservative voices others are up in arms about hiring practices or how child porn and child trafficking happen through it or just the fact that they hate zuckerberg and of course underneath all that is fear a fear of the power of two billion users a user base bigger than the biggest country in the world and now they want to create a money not only that they want to create a money that explicitly diminishes the standing of the us dollar at least in their eyes by having it backed by a basket of currencies not just the us dollar this is fundamentally not just another synthetic euro dollar representation it's its own unit of account and oh by the way just for funsies they're going to set up in switzerland not the us obviously since then the project has evolved quite a bit including most notably to me facebook backing away from the original basket of currencies approach this is the biggest design decision that i think had high implications in the first place and the fact that they backed away from that really says that it was clear that that was not going to pass muster from u.s regulators meanwhile the response of course if you've been listening to the breakdown you know that central banks around the world race to start preparing their own digital currencies seeing this libra moment as something of a starting gun but also other parts of the private sector shift their attention as well they shift from enterprise blockchain whatever that means to actual internal currencies and proprietary settlement systems and that's where we entered jpmorgan jpmorgan previously built something called quorum which is effectively like an enterprise version of ethereum they recently however offloaded the quorum project to consensus which is a key member of the ethereum ecosystem it turns out it wasn't to get out of blockchain per se but to switch their focus we've learned this week that jp morgan has created a new blockchain unit called onyx onyx has more than 100 staffers so this is a pretty serious thing takis georgia coppolos is the global head of wholesale payments and had a bunch to say about this initiative telling cnbc that quote we are launching onyx because we believe we are shifting to a period of commercialization of these technologies moving from research and development to something that can become a real business georgia coppolos added that a large international tech company is already as of this week using jpm coin for cross-border payments so this is the first commercial use of jpm coin the project itself was launched in february 2019 and at that time it was said that it would be used to settle cross-border payments in a faster way each jpm coin would be redeemable for one usd for a sense of just how big an area this is for jp morgan this is a company that moves more than 6 trillion a day across more than 100 countries what about the business model let's grab a few quotes from a cnbc article about this banks could charge a few cents to confirm data for each transaction saving money on remediating mistakes and creating a model to earn money by participating in the network according to umar farooq the bank's newly named ceo of onyx they also talked about ending the paper check system georgia coppolo said we're talking about hundreds of millions of checks being sent using a version of blockchain with the participants being the main issuers of checks and the main operators of lockboxes it's possible we can save 75 of the total cost in the industry today and make checks available in a matter of minutes as opposed to days in these interviews jpmorgan also said that they're looking to create new separate payment rails for central banks in the coming central bank digital currency moment so let's talk significance first there is significance around where this suggests our industry is as a whole and i'm going to go back to a quote from the article that i was sharing before the developments give jpmorgan executives confidence that blockchain is past a period of inflated expectations and will soon start to yield real solutions that follows the path of the so-called gardner-hype cycle which is a model for the adoption of new technologies quote if you think about blockchain we are either somewhere in the trough of disillusionment or just beyond that on the hype cycle farouk said referring to stages of the gardner cycle that's why at jpmorgan we've been relatively quiet about it until we were ready to scale and commercialize it this is a commercial implementation of a private stablecoin inside of jpmorgan got to know that that's going to be a big deal and i think that's the second part of this significance is the implications for other companies you have to believe that every other competitor out there is going to do something similar we're going to see every type of coin that you can imagine but inside these big investment banks the big question is what other uses these currencies eventually have if any do they just stay in their lane do they just help with these sort of internal cross-border settlement ideas or do they start to find their way into other use cases as long as they stay pegged to the us dollar there are potentially some limits on how disruptive it will be but make no mistake that this is a fundamentally new era where all of a sudden these corporations are going to use this type of synthetic currency as a key part of how they do business given how much we've seen just native organic decentralized adoption of stable coins this year it's hard for me to imagine that these technologies won't end up finding their way into some very different use cases than currently jpmorgan executives are thinking about anyways guys what do you think is this a big deal or is this a total non-news event that's just us getting hyped about jp morgan doing something with blockchain hit me up on twitter let me know at nlw and until tomorrow guys be safe and take care of each other peace