JPMorgan has been replacing key privacy components of its Quorum blockchain platform over the past six months.
The global banking giant intends to expand its use of the shared ledger technology, while inviting fintech firms to experiment with its DLT platform
J.P. Morgan bank has been actively following the recent fintech trends. A few years ago, it created its own DLT platform Quorum, backed by Ethereum. The platform was made to conduct faster payments and smart contract development.
The goal was to compete with the rising power and impact of crypto platforms, such as Ripple. The latter is targeted at integrating into the global banking system and conducting instant payments using its XRP coin.
The Interbank Information
In 2017, J.P. Morgan launched a pilot of its Interbank Information Network (IIN) on the basis of Quorum. Last year, around 75 banks around the world became part of the network.
Now, as reported by The Financial Times, the IIN enables banks to quickly solve various issues which may delay financial transactions by as long as weeks.
Ripple is developing fast
By joining the J.P. Morgan’s DLT network, banks also believe they can maintain their leadership in the industry of cross-border payments despite the increasing power of virtual payments platforms, such as Stellar, Ripple, TransferWise, etc.
In 2018, a big number of banks globally joined the Ripple network and began testing the startup’s payment system. Among them are Santander, Mitsubishi, Banco Bradesco and many others.
The IIN is expanding
By now, over 200 banking institutions have joined the IIN, enabling payment
data to be shared, which helps to eliminate various issues quickly and conduct
As per the head of global clearing of J.P. Morgan, John Hunter, now the bank has created a feature which would allow verifying payments in real time, making sure the payment goes to the proper account without being rejected or delayed.
The system will be ready to start by Q3 2019. Though it will work with
domestic and trans-border financial transactions, J.P. Morgan believes it will
be more effective for the latter, since error rates are higher in trans-border
In Q3, the J.P. Morgan’s network also intends to launch a sandbox for fintech startups. It will allow them to use the IIN for making their dapps. The testing system will provide devs with ready-made blocks to be used for secure messaging, documents transfer and technical opportunities for data modeling.
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Banco Santander has completed a blockchain pilot that it says improves the process of proxy voting during annual general meetings (AGMs).
For the project, announced Thursday, Santander partnered with global fintech firm Broadridge and custodian banks JPMorgan and Northern Trust, describing it in a press release as the “first practical use of blockchain” for shareholder voting.
However, it should be noted that other entities such as Nasdaq, the Abu Dhabi Stock Exchange and a group of central securities depositories, including Russia’s National Settlement Depository, have all conducted pilots, are developing systems or have launched platforms around the use case.
The Broadridge-built solution – piloted previously in April of last year – aims to improve transparency in the global proxy voting system, while also increasing security, efficiency, security and analytics, the release says.
The pilot was concluded on March 23 for the Spanish banking giant’s AGM and saw participation from Santander’s blockchain lab and Corporate Services, which acted as the issuer’s agent. The blockchain solution was used to produce a “shadow” digital register of the proxy voting system taking place in parallel using the conventional voting model.
Sergio Gamez, global head of shareholders and investor relations at Santander, said that, for a listed company like Santander, the AGM is one of the most important corporate governance events.
“It is very important to ensure the participation by investors and shareholders, and this year using blockchain technology for the institutional vote has been a great help in terms of transparency and agility across the vote life cycle.”
As mentioned above, Broadridge executed a similar pilot focused on proxy voting in collaboration with the same partners last April. The project used a private version of the ethereum blockchain as a backup system to more traditional voting software. The trial was conducted at an annual meeting at Santander Investments.
“The successful completion of a second pilot along with the next phase of our blockchain-based proxy voting solution demonstrates Broadridge’s continued commitment to developing innovative technology solutions in the re-imagination and improvement of global proxy,” said Patricia Rosch, president of investor communications at Broadridge.
Santander image via Shutterstock
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The crypto markets are a bit sluggish this Monday morning. But it is alright. Bitcoin (BTC) has only dropped 1.65% but maintained levels above $8,000. BTC is currently trading at $8,070. Ethereum (ETH) is still strong at $511 and Ripple (XRP) doing well at $0.655. Litecoin (LTC) seams to have found a footing above $120 and is currently trading at $127.
All the market action was catalyzed by a major pump by Bitcoin on Thursday the 12th of April. What happened is that Bitcoin did a cool $1,000 gain in less than an hour and left many traders speechless and excited. Another possible reason for the pump is the current advice by a leading Islamic Scholar who stated that Bitcoin was permissible under Sharia Law. This then opened up Crypto trading to an estimated 1.6 Billion Muslims around the world. Perhaps they rushed in to buy as soon as this news was received.
It is with such momentum that one can muse that the final endorsement of Bitcoin (BTC) and cryptocurrencies in general, might come from the President and CEO of J.P Morgan and Chase, Jamie Dimon. Mr. Dimon was initially a tough critic of Bitcoin but he would later regret calling it a fraud. This was back in early January.
What then has happened since then, is that Cryptocurrencies have taken mainstream investing by storm with a few notable turnarounds by former Bitcoin critics like Jamie Dimon. The first to change his mind, was Shark Tank Investor and Dallas Mavericks owner, Mark Cuban. He was later followed by billionaire investor, George Soros. His approval for crypto investing was not direct but through his investment fund management firm. He gave a go ahead for it to invest in crypto. Another entry of a prominent Wallstreet firm was the partnership of the Rockefeller family arm of investing, Venrock, with crypto startup, Coinfund.
It is with such a premise that an endorsement by Jamie Dimon – whether directly or indirectly like in the case of George Soros – would be one major step to legitimizing cryptocurrencies 100% as profitable alternative sources of investment. The event would be monumental in the sense that J.P Morgan Chase is the largest bank in the United States with a similar reach across the globe.
However, the bank has been accused of inflating its fees for cryptocurrency purchases by traders in America who used their credit cards to do so. According to customers, the bank was treating crypto purchases as cash advances. Perhaps this is the indirect endorsement the Crypto-verse needed. If the bank treated the purchases as cash advances, then it recognizes crypto as currencies. Right?
[Photo source, huffingtonpost.com]
Cryptocurrencies could one day help investors diversify their equity and bond portfolios, analysts for JPMorgan Chase wrote in a new, 71-page research report focused on the tech.
The report, entitled “Decrypting Cryptocurrencies: Technology, Applications and Challenges” and dated Feb. 9, was drafted by the bank’s Global Research unit. A copy obtained by CoinDesk explores a range of subjects related to cryptocurrency and blockchain, notably exploring the implications for investors, financial firms and central banks, among others.
Perhaps the most notable part of the report is that it – albeit cautiously – predicts that cryptocurrencies might one day play a role in the diversification of global bond and equity portfolios. The report states:
“If past returns, volatilities and correlations persist, [cryptocurrencies] could potentially have a role in diversifying one’s global bond and equity portfolio. But in our view, that is a big if given the astronomic returns and volatilities of the past few years.”
“If [cryptocurrencies] survive the next few years and remain part of the global market, then they will likely have exited their current speculative phase and would then have more normal returns, volatilities (both much lower) and correlations (more like that of other zero-return assets such as gold and JPY),” the authors continue.
That sentiment perhaps stands in contrast with comments from the bank’s chairman, president and CEO, Jamie Dimon, who last year issued his now-infamous remark that bitcoin is a “fraud.” As posited by the report’s authors, cryptocurrencies are “unlikely to disappear completely.”
“[Cryptocurrencies] are unlikely to disappear completely and could easily survive in varying forms and shapes among players who desire greater decentralization, peer-to-peer networks and anonymity, even as the latter is under threat,” they wrote.
Looking past the investment picture, the bank’s report looks at the wider question of blockchain use, particularly by private firms who would maintain their own gated or “permissioned” blockchains.
The authors write that blockchain is a “superior database,” and that despite concerns from regulators, the tech itself is potential “regulation friendly.”
“In our view, the biggest appeal of blockchain will be in the ability to deliver efficiency gains across the value chain,” the report states, going on to explain:
“The proposed uses a distributed ledger in the financial sector are likely to be based on known participants defined in advance, with appropriate KYC/AML documentation with tightly authorized access. Consequently, we believe that distributed ledger technology has the potential to offer regulators greater degrees of transparency, higher levels of resiliency and shorter settlement times, reducing counterparty and market risk.”
Likewise, the authors argued that blockchain has the potential to disrupt “cross-border payments, settlement/clearing/collateral management as well as the broader world of TMT, transportation and healthcare.” That said, the report cautions that any benefits would be seen “only where any cost efficiencies offset regulatory, technical and security hurdles” to implementing the technology.
On central bank cryptos
The report also touches on the topic of a so-called “Fedcoin,” or a kind of cryptocurrency (or digital currency) created by a central bank.
And while Fed officials themselves have largely said “no time soon” to the idea (in contrast with other central banks who are actively investigating applications), JPMorgan’s report digs into the possible implications – and ramifications – of such an issuance.
The report’s authors make the case that, in one sense, a Feedcoin would be supportive of a “central bank-provided payment services” within a cashless system, and that this could help banks implement negative interest rates, which some economists endorse.
However, they also point out that the issuance of such a currency “would give non-banks access to the Fed balance sheet,” which could in turn “endanger the economically and socially important financial intermediation function of commercial banks.”
Likewise, the authors claimed that a state-issued cryptocurrency could impact the extension of credit to the private sector because it would undermine fractional reserve banking, writing:
“If cryptocurrencies were seen as superior to bank deposits, prompting a wholesale shift into cryptocurrencies, then a much larger share of savings would go to the central bank’s assets (government debt) and less to commercial banks loans, thus potentially dramatically increasing private credit risk premia and reducing the flow of credit to the private sector”
The report also grapples with the problem of anonymity for a state-issued cryptocurrency.
“On the one hand, privacy has come to be seen as an implicit constitutional right, and that may extend to monetary transactions,” the authors note. “On the other hand, there are several laws on the books intended to prevent the financial system from being used to launder money or finance terrorism and other activities.”
Image Credit: Lewis Tse Pui Lung / Shutterstock.com
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