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Beacon of the Crypto Economy: JPMorgan, First Mover Bank in the Metaverse

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16 February 2022
Alenka Grealish

A Treasury Services and Payments Play

On the heels of luxury brands (Gucci, Louis Vuitton) and mainstream brands (Nike, Walmart, Coca-Cola), JPMorgan has entered the metaverse with Onyx Lounge in Decentraland. JPMorgan’s innovative move is both a treasury services and payments play.

What’s the metaverse?
Merriam-Webster defines the metaverse as "a highly immersive virtual world where people gather to socialize, play and work."

Currently there are numerous virtual worlds, some born out of Web 2.0 (today’s internet that is dominated by platform players, e.g., Google, Meta, i.e., centrally owned and controlled) and others rising from Web 3.0 (ascendant decentralized internet built on the blockchain owned and controlled by users). Top Web 2.0 metaverses include Fortnite, Roblox, and World of Warcraft. Ascendant Web 3.0 metaverses include Decentraland (JPMorgan’s choice) and Sandbox.

For more definitions, please see my blog Web 3.0 and other DeFi-nitions

What is Decentraland?
A top Web 3.0 metaverse. To enter, you need a crypto wallet with MetaMask, Fortmatic, or WalletConnect.

Onyx by JPMorgan lounge in Decentraland:

Why does the metaverse matter?
It could be the successor to the mobile internet. The numbers are getting material:

  • Spending on virtual goods:$54B annually, which equates to 2019 global spending on subscription video on-demand (Matthew Ball VC cited by JPMorgan; Statista, respectively)

  • Daily chat messages on Roblox: 2.5B, greater than Facebook Messenger’s ~0.7B (2021)

  • Ownership of non-fungible tokens (NFTs; digital goods built on blockchain tech): $41B, ~1.5x global revenues of digital music (Statista)

  • Potential addressable user market: 250M global gaming users (Grayscale)

What’s Onyx?
A business unit within JPMorgan announced Oct. 2020 whose objective is to commercialize blockchain products and solutions.

JPMorgan’s rationale to launch a BU:

  • The opportunity to operate at the intersection of traditional finance and technological advancements within a new business unit uniquely positions Onyx to execute on its vision.
    - Onyx is not providing traditional products/services
    - Rather it is building a platforms and applications that other FIs and corporations can use

  • Its new value propositions challenge JPMorgan’s historical business model.
    - Partior challenges traditional clearing models
    - JPM Coin challenges liquidity management offerings
    - Liink challenges information flows and revenue models
    - Onyx Digital Assets challenges traditional asset ecosystems

For further discussion, please see my report Mapping the Crypto Galaxy Part 1: Transaction Banking and Payments.


What’s JPMorgan’s metaverse value proposition?
It is striving to support its tech, media, telecom (in particular, gaming and e-commerce platforms) clients in monetizing the metaverse by delivering payments, tokenization (financial asset creation), trading, and custody services.

“The success of building and scaling in the metaverse is dependent on having a robust and flexible financial ecosystem that will allow users to seamlessly connect between the physical and virtual worlds. Our approach to payments and financial infrastructure will allow that interoperability to grow.

We believe the existing virtual gaming landscape (each virtual world with its own population, GDP, in-game currency, and digital assets) has elements that parallel the existing global economy. This is where our long-standing core competencies in cross-border payments, foreign exchange, financial assets creation, trading and safekeeping, in addition to our at-scale consumer foothold, can play a major role in the metaverse.”

For further insights, see JPMorgan’s white paper Opportunities in the Metaverse.