Jamie Dimon hated bitcoin. Now JPMorgan is getting ahead of the crypto revolution

New York(CNN Business) JPMorgan Chase boss Jamie Dimon famously bashed bitcoin as a "fraud" that global governments would "crush." Less than two years later, Dimon is pushing his company headfirst into the crypto space.

The bank is launching its very own digital coin. JPMorgan is the first major American bank to do so.

The debut of JPM Coin, which unlike bitcoin is equivalent to the US dollar, highlights the potential long-term threat blockchain poses to traditional financial players. The speed and security offered by blockchain makes the payment space ripe for dramatic disruption.

"JPMorgan and the other big banks have no choice but to go down this road," said Ed Yardeni, the former chief economist at Deutsche Bank who now leads Yardeni Research. "If JPMorgan doesn't do it, someone else will."

Current system is 'slow and crappy'

While Dimon publicly bashed bitcoin, his bank was quietly researching the promise of blockchain, the tamper-proof digital ledger that bitcoin is built on.

"We've always been supportive of blockchain. We've always believed it's a good technology," Umar Farooq, JPMorgan's head of digital treasury services and blockchain, told CNN Business on Thursday after the JPM Coin announcement.

Based on blockchain technology, JPMorgan (JPM) said its digital coin provides the "instantaneous" transfer of payments between institutional accounts.

That portends a major improvement from how money is currently shuttled through the financial system.

"It's universally taken as fact that the current system is really old, slow and crappy," Travis Kling, CEO of bitcoin hedge fund Ikigai Asset Management, told CNN Business.

Case in point: Kling said the fastest way to get $10,000 from LA to London is to put it in a briefcase and fly it.

"That's incredibly ridiculous," he said.

Middle men face disruption

It only makes sense that JPMorgan, the largest US bank by value and deposits, would try to improve that antiquated system.

"JPMorgan has an unparalleled blend of business acumen, technical experience, and scale to be able to not only envision the future of banking, but to will it into existence," Amber Baldet, JPMorgan's former head of blockchain, told CNN Business.

It's important to note that the JPMorgan coin remains a prototype and will only be available to a select number of institutional customers at first.

Farook said that even several years down the line it's likely that JPM Coin will represent a "pretty small portion" of the $6 trillion in payments that JPMorgan moves around each day.

Tom Serres, co-founder at Animal Ventures, said it was "pretty much inevitable" that JPMorgan would launch a coin.

"Anyone who functions as a middle man validating and verifying transactions is at risk for disruption when it comes to blockchain," said Serres, whose firm invests in tech startups and crypto infrastructure. "If you're not experimenting with this technology, then you're definitely losing out on huge opportunities."

One of the most alluring benefits of the blockchain is that it can reduce the speed and uncertainty that comes with traditional payments. That means transactions can be done more cheaply.

Will more banks follow suit?

And JPMorgan may just be the first of the major US players to jump into the space.

In December, Signature Bank (SBNY), a New York-based commercial lender, launched a digital payments platform based on blockchain.

Major foreign lenders including HSBC (HBCYF) and Mitsubishi MUFG, are reportedly exploring crypto as well.

"It's a great step forward. I expect other institutions, including TD, will do things like this going forward," said Rick Burke, head of corporate products and services at TD Bank (TD).

TD Bank released a survey last week that showed 90% of financial professionals believe blockchain and distributed ledger technology will have a positive impact on the payment industry. The top three impacts listed: stronger audit trails, speeding up the process and improving the efficiency of cross-border payments.

Don't confuse it with bitcoin

Crypto insiders caution that the JPM Coin is very different than bitcoin and other crypto currencies.

Bitcoin is decentralized, meaning its value isn't controlled by the Federal Reserve or any government authority. That makes bitcoin's worth subject to insane price swings.

"This is definitely not like that," said JPMorgan's Farooq.

Unlike bitcoin, JPM Coin is always equal to one US dollar, backed by actual greenbacks held in designated accounts at JPMorgan. That makes it a centralized currency linked to the existing system.

JPM Coin "needn't worry proponents of cryptcurrencies like bitcoin -- it's not the same thing," said Baldet, the former JPMorgan blockchain exec who is currently CEO of Clovyr, a company focused on data sharing.

While major global governments might cast a wary eye on digital currencies they can't control, the JPM Coin isn't a threat to the current system. It's pegged to the world reserve currency and run by a company with deep ties to Washington and foreign capitals.

"The government is more than happy to let a company like JPMorgan shuttle in with this replacement," said Kling, the crypto hedge fund CEO.

Nonetheless, the launch of a digital coin by the largest US bank is a major milestone in the crypto world.

"We are in the early stages" of the blockchain revolution, said Farooq. "It's still early days."

JPMorgan is clearly determined not to get left behind in that revolution.