JP Morgan to Patent Bitcoin-Like Virtual Cash [VIDEO]

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By Jerin Mathew | December 11, 2013 5:47 PM EST

Bitcoins are seen in a photo illustration. (Reuters)

US banking major JP Morgan has filed to patent an online payment system that is similar to the emerging virtual currency, Bitcoin.

JP Morgan said in a filing with the US Patent and Trademark Office that its planned "virtual cash" would allow users to make payments anonymously just like Bitcoin.

"One of the features of the electronic credit pushes of the present invention is that the credit pushes can be made completely anonymously, with the recipient of the credit having no way to determine from where the credit originated," the company said.

The scope of the invention is not limited to online shopping and business-to-business transactions. The method allows anyone with an account at an institution to transfer funds to anyone else who also has an account at the same or a different institution, the bank noted.

"The pay anyone feature of the present invention allows parties to electronically transmit funds instantaneously without the expense of today's wiring fees," the bank added.

Structure of New System

"The structural components to the system of the present invention include: a Payment Portal Processor; a digital Wallet; an Internet Pay Anyone (IPA) Account; a Virtual Private Lockbox (VPL); an Account Reporter; the existing EFT networks; and a cash card," the filing said.

The Payment Portal Processor (PPP) is a software application that augments any Internet browser with e-commerce capability.

"The PPP software sits in front of and provides a secure portal for accessing (finking to) the user's Demand Deposit Accounts (DDA) and IPA accounts. The PPP enables the user to push electronic credits from its DDA and IPA accounts to any other accounts through the EFT [Electronic Funds Transfer] network. "

Bitcoin Growth

Bitcoin, the peer-to-peer virtual currency, was launched in 2008 and is traded within a global network of computers. They can be transferred without going through banks or clearing houses, reducing fees involved significantly.

It is currently being used by a large number of businesses and consumers to sell and buy products and services.

The digital currency passed the $1,000 (£608, €727) mark for the first time on 27 November, representing a gain of more than 4,000% since the start of 2013. The currency's value surged after a US Senate committee hearing was told virtual currencies were a "legitimate financial service", with the same advantages and disadvantages of other online payment systems.

Despite its rising popularity, critics point out that bitcoins have already been used for drug transactions, money-laundering and other illegal activities due to their near-anonymity.

Earlier in October, US regulators shut down an online marketplace using bitcoins named Silk Road on charges of buying and selling illegal drugs and regulators seized $3.6m worth of bitcoins.

China had earlier banned its banks from handling transactions involving Bitcoins, as the currency was not backed by any nation or central authority.

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