Posted on

JP Morgan's New DLT Lead: We're Not Done With Blockchain Innovation

As JP Morgan Chase’s new blockchain lead, Christine Moy has big shoes to fill. And a quandary to resolve.

Moy took over last month from Amber Baldet, one of the most prominent figures in blockchain, after she left to form an as-yet-unnamed startup. Around the same time, Baldet announced her departure, word leaked out that JP Morgan was considering a spin-out of Quorum, the ethereum-based, open-source project that had been the cornerstone of the bank’s blockchain work.

To be clear, those deliberations do not mean Quorum is struggling – big corporates like JP Morgan tend to shelve failing projects, not spin them out into funded entities.

Indeed, it could be argued that Quorum may have become a victim of its own success. There are more than 20 organizations within the Enterprise Ethereum Alliance working group looking to build on top of the platform.

But for JP Morgan, the challenge is about allowing Quorum to flourish independently, in true open-source protocol style. Perhaps private blockchains, like their public counterparts, face difficult governance problems, too – especially once they start to gather a network effect.

Yet in an interview this week, Moy was quick to emphasize that the recent speculation around Quorum does not capture the breadth of JP Morgan’s work in distributed ledger technology (DLT).

She told CoinDesk:

“That’s not the most exciting part about our team’s agenda; it’s part of the story but it’s not, like, the story.”

And it’s true that JP Morgan is involved in a number of important blockchain projects that are separate from Quorum, such as its collaborations with Digital Asset Holdings, Axoni and Nivaura. Nevertheless, the fate of Quorum is the elephant in the room that will have to be addressed.

Fortunately for JP Morgan, in Moy it has a leader who not only knows that project inside and out but is all too familiar with the reasons the bank started exploring the tech to begin with.

Cross-trained for blockchain

Moy, the new program lead for the Blockchain Centre of Excellence (BCOE) at JP Morgan, brings to the role firsthand knowledge of exactly the kind of problems that distributed ledger technology aims to solve.

She started her career in the middle office of JP Morgan’s syndicated loans business. In this job, Moy had to deal with all the documents that needed to be signed before these transactions could close. Even more antiquated than most corners of legacy finance, syndicated loans can take 20 days to settle.

“I used to be the person that faxed those documents around to settle those trades, so I know that process intimately,” Moy said.

She then spent over a decade working across a range of assets and divisions at the bank. This cross-training included witnessing how securities and chains of custody were frozen solid as the 2008 crash engulfed the entire financial system.

That experience underscored for her the importance of a transparent system of reconciliation – just as the syndicated loans role drove home the need for faster settlements.

With that pedigree and perspective, Moy was a natural for the BCOE, where she was Baldet’s first hire.

Yet perhaps most importantly, working in various parts of a sprawling, diversified company – one assembled from decades of mergers – has shaped Moy’s thinking about one of the key challenges for DLT, particularly the private kind: interoperability.

“It doesn’t make sense to design blockchains to reflect the siloed operating models existing today,” she told CoinDesk, adding:

“Creating a fragmentation of small blockchain networks, without figuring out a way to enable interoperability or connectivity, is likely not the promised path to the cost savings and operational efficiency that enterprises are looking for.”

Open source, open mind

This, of course, brings up another delicate subject for a bank, particularly one whose CEO has famously bashed bitcoin: public blockchain networks.

Quorum, although built with open-source code, is a private blockchain, the kind that was in vogue a few years ago when enterprises (financial institutions in particular) were keen to experiment with the technology but wanted nothing to do with any cryptocurrency.

Lately, though, once-sharp lines have slowly started to blur. According to many ethereum advocates, we are only just at the dial-up internet stage of a totally new value transacting ecosystem. The end goal is connecting the private world of finance with public blockchains.

In an effort that was perhaps unthinkable a year ago, the EEA (which just published its architecture stack diagram) is actively building these bridges, along with the work of the Ethereum Foundation and also the help of a wide and populous developer community.

For her part, Moy said several times that she is “agnostic,” or neutral, about which blockchain or protocols are used. But she said it’s important to stay in touch with the innovation taking place in the public sphere.

“One of the important things for us working on an ethereum variant was kind of being able to stay close to that and potentially even being able to integrate some of that innovation and work into the stuff that we are doing,” she told CoinDesk, before musing:

“Maybe one day this will all converge.”

On the other hand, while she may be protocol-agnostic, Moy believes the basic building blocks for enterprise DLT are now all in place.

“The creation of new protocols in the enterprise space has largely subsided, and there are just a few key protocols that everyone broadly recognizes will remain,” she said.

Quorum quandary

Returning to Quorum, Moy views the project as an example of how open source software, once handed to the community, takes on a life of its own.

“We are entering this interesting point where other entities want to use Quorum, want to take it to production,” she said.

A whole host of entities picked up Quorum and started using it, Moy noted, name-checking IHS Markit, Broadridge, Synechron, ING, and BlockApps. The platform has amassed a tribal following.

“Quorum has strong momentum in capital markets,” said John Olesky, managing director at IHS Markit, a global financial data provider. “It benefits not only from the halo effect from JP Morgan and the technological rigor that comes from a global bank skilled in enterprise-strength software and compliance issues such as privacy.”

But this raises a problem, because it requires a level of support that’s only really possible if there’s a company dedicated to helping enterprises integrate the technology, the way Red Hat supports corporate Linux users. Businesses want someone they can call to fix bugs or when the network is down. Software support is not the bank’s business.

This is why JP Morgan is mulling over a spin-out. While reviewing its options, the bank is also looking at doing more investing internally and hiring more engineers, a spokeswoman said.

In the meantime, Moy’s focus is on bringing new business applications to Quorum, such as the testing of a debt issuance platform with a host of institutional investors.

Her team recently executed a $150 million Yankee certificate of deposit (denominated in U.S. dollars but issued by a foreign bank) in the form of an ERC-20 token on Quorum. (ERC-20 is the standard that launched countless initial coin offerings on the public ethereum blockchain.)

A smart contract automated the offering, the distribution and, crucially, the “delivery versus payment“- meaning the investors got their securities only upon paying cash. This is notable because cash is king in the world of clearing and settlement – and getting cash onto a shared ledger is seen as a vital part of the puzzle for blockchain builders.

Moy also sees the Yankee CD trial as a harbinger of a more open and transformed financial system.

“This is an example of us issuing a traditional financial instrument natively on the blockchain,” she said. “But the next phase is when you have real asset managers participating in a product like this; it’s about, what does custody look like? What does fund administration look like – and what does a trades market look like for something like this?”

Christine Moy photo by Jena Cumbo, via JP Morgan Chase.

The leader in blockchain news, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups.

Posted on

JPMorgan Seeks Patent for Blockchain-Powered Interbank Payments

JPMorgan Chase is seeking to patent a system for using distributed ledgers as a way to facilitate and reconcile financial transactions, newly-released filings show.

In a patent application published by the U.S. Patent and Trademark Office on Thursday (which was originally submitted last October), JPMorgan outlined a system that uses distributed ledgers to record payments being sent from one bank to another using a peer-to-peer network. According to the bank, the tech’s use would provide “a unique system for recording transactions and storing data.”

The ability to replicate that data on the ledge across a public or private distribution network offers another benefit, the filing notes.

JPMorgan goes on to explain:

“In one embodiment, a method for processing network payments using a distributed ledger may include: (1) a payment originator initiating a payment instruction to a payment beneficiary; (2) a payment originator bank posting and committing the payment instruction to a distributed ledger on a peer-to-peer network; (3) the payment beneficiary bank posting and committing the payment instruction to the distributed ledger on a peer-to-peer network; and (4) the payment originator bank validating and processing the payment through a payment originator bank internal system and debiting an originator account.”

A blockchain could improve upon existing systems by allowing real-time settlement more cheaply and quickly than is possible at present, according to the bank.

“For a cross-border payment to be made from a payment organization to a payment beneficiary, a number of messages must be sent between the banks and clearing houses involved in processing the transaction. This often results in a slow transaction, as there are may be delays in service due to correspondent banking, messaging networks, and clearing intermediaries in the payment flow,” the application explains.

It’s perhaps unsurprising that JPMorgan would seek a patent for its blockchain-related work in the area of interbank payments. The bank launched a platform for just that kind of service, built on ethereum-offshoot Quorum, days before it filed the patent application.

“Blockchain capabilities have allowed us to rethink how critical information can be sourced and exchanged between global banks,” Emma Loftus, head of global payments and foreign exchange for JPMorgan Treasury Services, said at the time.

JPMorgan image via Jonathan Weiss / Shutterstock

The leader in blockchain news, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups.

Posted on

JPMorgan Trial Puts Debt Issuance on a Blockchain

JPMorgan Chase has partnered with National Bank of Canada and other major firms to trial a blockchain platform aimed to improve the debt issuance process.

As reported by Reuters, the investment bank said in a statement Friday that trial, which took place on on Wednesday, mirrored a $150 million offering the same day by the the National Bank of Canada of a one-year floating-rate Yankee certificate of deposit.

The trial also saw participation from Goldman Sachs Asset Management, Pfizer, Legg Mason Inc’s Western Asset and others.

David Furlong, senior vice president of blockchain at National Bank of Canada, said in a statement that blockchain technology “has the potential to bring about major change in the financial services industry.”

Based on JPMorgan’s Quorum blockchain, the debt-issuance platform took over an year to build, according to the report.

As reported by CoinDesk in March, JPMorgan is currently mulling spinning off the Quorum project as an independent company.

A spokesperson for the bank declined to comment on what they called “speculation” at the time, but said that “Quorum has become an extremely successful enterprise platform even beyond financial services and we’re excited about its potential.”

However, Umar Farooq, head of blockchain initiatives for JPMorgan’s corporate and investment arm, confirmed the move to Reuters, saying that discussions are in the early stages and the bank has noted interest from financial institutions in the project.

The open-source Quorum blockchain was launched in 2016 as a permissioned version of ethereum.

In October 2017, Quorum notably integrated the zero-knowledge security layer (ZSL) from privacy-focused public blockchain zcash.

The technology obscures all identifiable information about a transaction but still provides the ability to audit those transactions.

JPMorgan image via Shutterstock

The leader in blockchain news, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups.

Posted on

Report: JPMorgan Considers Spinoff of Quorum Blockchain Division

Global banking giant JPMorgan Chase is reportedly thinking about spinning out its Quorum blockchain project as an independent company.

Citing anonymous sources, the Financial Times and Reuters reported late Thursday that the move, if it happens, would be part of an effort to “increase the platform’s appeal.”

Talks regarding the spinoff are “still in the early days,” according to Reuters.

Quorum, an open-source project, was launched in 2016 as a permissioned version of ethereum. JPMorgan debuted the project at the annual Sibos conference.

According to Reuters, a JPMorgan spokesperson declined to “comment on speculation” regarding the supposed move, but said that “Quorum has become an extremely successful enterprise platform even beyond financial services and we’re excited about its potential.”

Reuters could not confirm whether Quorum’s existing employees would join the spun-off entity. The project has notably been headed up by JPMorgan’s Blockchain Center of Excellence executive director Amber Baldet.

It is similarly unclear what Baldet’s plans are should Quorum be launched as an independent entity, an anonymous source told Reuters.

The bank’s spokesperson told Reuters, “we continue to believe distributed ledger technology will play a transformative role in business which is why we are actively building multiple blockchain solutions.”

Last year, the Quorum team announced an interbank payments system in partnership with Australian bank ANZ and the Royal Bank of Canada.

Representatives for JPMorgan Chase did not immediately respond to CoinDesk’s request for comment.

JPMorgan Chase image via Lewis Tse Pui Lung / Shutterstock

The leader in blockchain news, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups.

Posted on

Why Banks Are Finally Talking Crypto In Filings

Marc Hochstein is the managing editor of CoinDesk. 

The following article originally appeared in CoinDesk Weekly, a custom-curated newsletter delivered every Sunday exclusively to our subscribers.


“We don’t have them on the ropes yet but we definitely have them scared.”

That was the assessment of CoinDesk reader FireFox Bancroft, commenting on our story last month about Bank of America’s mention of cryptocurrency in the “risk factors” section of its annual filing with the Securities and Exchange Commission.

“Scared” might still be a bit of an overstatement. But it’s clear from the latest round of annual reports (also known as 10-K filings) that financial institutions, ranging from B of A’s gargantuan peers to regional players, are taking bitcoin and its brood more seriously than they did a year or even six months ago.

That change is a reflection of how far cryptocurrency and blockchain technology have come in a short time, not only in terms of valuation but also public awareness, even if widespread consumer adoption remains distant.

For Bank of America, the threat is twofold: cryptocurrency use could make it harder for the bank to trace financial flows in order to comply with anti-money-laundering laws, and the technology is a potential competitor to traditional financial intermediaries.

Echoing the latter concern, JPMorgan said some financial services business lines, including payment processing, “could be disrupted by technologies, such as cryptocurrencies, that require no intermediation.” It was a striking acknowledgment from a company whose CEO famously called bitcoin a fraud (though to be fair, he did later express regret over that remark).

But it’s not just Wall Street that’s got crypto on its radar. Main Street banks like WesBanco in West Virginia and IberiaBank in Louisiana also mentioned potential competition from the technology in their 10-Ks. Again, these are not the too-big-to-fail behemoths that Occupy and Elizabeth Warren rail against; they’re the successors to the Bailey Building & Loan in “It’s a Wonderful Life,” the institutions that host barbecues for the local chamber of commerce and march in the town parade. And they think they might plausibly lose some customers to crypto.

Perhaps the least surprising company to join this club was Goldman Sachs, considering that the investment bank started clearing bitcoin futures for clients toward the end of last year, though it’s not directly touching crypto.

Square is, however, through its Square Cash app’s bitcoin-buying feature, and one of the risk concerns cited by the payments company reflected this deeper involvement.

It warned that accounting rules for publicly traded companies aren’t clear on how to treat cryptocurrency. So there’s the possibility that if auditors or regulators disagree with method Square uses, it may have to restate previously reported results. Which is rarely good for a company’s stock price.

Kitchen sink

Stepping back, it’s important to recognize that despite the disclosures, these companies may still consider the risk from crypto to be remote.

Banks in particular tend to take an “everything but the kitchen sink” approach to their risk factor disclosures, likely as a CYA measure (the family-friendly term for that is “cover your assets”).

For example, in Goldman Sachs’ report, just before the passage on blockchain risk, is this warning:

“The use of computing devices and phones is critical to the work done by our employees and the operation of our systems and businesses and those of our clients and our third-party service providers and vendors. It has been reported that there are some fundamental security flaws in computer chips found in many types of these computing devices and phones. Addressing this issue could be costly and affect the performance of these businesses and systems, and operational risks may be incurred in applying fixes and there may still be residual security risks.”

That could probably be said of almost any business in the world today, except maybe the guy selling hot dogs on the corner or a rug seller in a bazaar.

Why include the obvious, along with the unlikely, in the list of contingencies? Under U.S. securities law, there’s no bright line rule for what’s “material” enough of a danger that it must be disclosed to shareholders. In a 2011 case, the Supreme Court refused to adopt a “statistical significance” test for materiality, instead reaffirming a previous decision‘s standard: would a reasonable investor have viewed the undisclosed event as significantly altering the total mix of information available?

So no, crypto doesn’t have the financial establishment on the ropes, and they may not even be scared. But they do think it’s a risk their shareholders might view as important enough to rate a mention under What Could Go Wrong For Us. That’s something.

Image via Shutterstock.

The leader in blockchain news, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups.

Posted on

JPMorgan Says It May Have to 'Adapt' to Counter Crypto Adoption

Global financial services company JPMorgan Chase has become the latest bank to label the rise of cryptocurrencies as a threat to its business.

In its annual 10-K filing with the U.S. Securities and Exchange Commission, the bank noted the potential impact that cryptocurrencies could have on payment processing under its “risk factors” section, saying the institution could be disrupted by the still nascent technology.

The bank wrote:

“Furthermore, both financial institutions and their non-banking competitors face the risk that payment processing and other services could be disrupted by technologies, such as cryptocurrencies, that require no intermediation. New technologies have required and could require JPMorgan Chase to spend more to modify or adapt its products to attract and retain clients and customers or to match products and services offered by its competitors, including technology companies.”

The comment echoes those made in the Bank of America (BoA) and Goldman Sachs annual filings. Both financial giants also included cryptocurrencies under their risk factors sections, though for various reasons.

Like JPMorgan Chase, BoA noted that clients could choose to use digital currencies instead of traditional banking services and crypto competition could force it to adopt new technologies.

Goldman Sachs took a similar tack, saying in its filing that the company could become “exposed to risks related to distributed ledger technology” due to how clients are turning to new financial products.

However, BoA also included concerns about following anti-money laundering and know-your-customer regulations, given the lack of regulatory oversight on cryptocurrencies.

This is the first time JPMorgan has included cryptocurrencies in its annual filing – the term did not appear in prior years. The declaration is notable both because of its timing, and because not so long ago, the bank’s chief executive Jamie Dimon called bitcoin a “fraud,” saying that cryptocurrency markets were in a bubble that would eventually collapse.

While he later said he regretted the comments, he has not retracted his view of a possible impending collapse.

JPMorgan Chase image via Shutterstock

The leader in blockchain news, CoinDesk is an independent media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. Have breaking news or a story tip to send to our journalists? Contact us at news@coindesk.com.

Posted on

Report: Bank of America, JP Morgan Ban Credit Crypto Purchases

Bank of America and JPMorgan Chase will reportedly no longer enable customers to purchase bitcoin with credit cards starting in February, reports say.

Revealed today in a Bloomberg report, JPMorgan is expected to start its ban on Feb. 3 due to concerns about the credit risk of those who make purchases through their cards. Bank of America is said to be launching its ban on Feb. 2, when transactions with known cryptocurrency exchanges are expected to be declined.

The Bank of America ban is limited to credit cards, and will not impact customers who wish to purchase cryptocurrencies using debit or ATM cards, according to the news source.

Bloomberg further reported that the Bank of America cited anti-money laundering regulations for the move, as well as the potential for thieves to convert stolen credit cards into cryptocurrency stashes.

Like JPMorgan, the Bank of America is also concerned with the idea customers can purchase more cryptocurrency than they can afford.

The move coincides with a broader discussion among financial firms about how their businesses are being impacted by the cryptocurrency economy, which after growing by leaps and bounds in 2017, has seen a sizeable market drawdown so far this year.

Earlier this month, for example, Visa cut ties with cryptocurrency debit card providers in Europe, while other banks have moved to increase charges for such transactions.

New York image via Shutterstock

The leader in blockchain news, CoinDesk is an independent media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. Have breaking news or a story tip to send to our journalists? Contact us at news@coindesk.com.

Posted on

Jamie Dimon Says He Regrets Calling Bitcoin a Fraud

JPMorgan Chase CEO Jamie Dimon now reportedly regrets calling bitcoin a “fraud,” though he is still not a fan of the cryptocurrency.

In an interview with FOX Business Tuesday, Dimon said:

“The bitcoin to me was always what the governments are gonna feel about bitcoin as it gets really big, and I just have a different opinion than other people. I’m not interested that much in the subject at all.”

Dimon made the fraud comment on Sep. 12 of last year, adding that he would fire any trader known to be trading the cryptocurrency.

Offering a critique of Dimon’s opinion at the time, a senior analyst for Macquarie Group pushed back against some of the criticism against bitcoin coming from Wall Street.

Viktor Shvets, head of global and Asia-Pacific equity strategy for Macquarie, wrote in September that in spite of any “extreme speculation,” bitcoin relies on a “durable technology that is likely to continue to evolve and strengthen.”

In October, Dimon said he was done talking about bitcoin following his controversial comment. Yet, soon after he opined that bitcoin buyers will “pay the price” if they are “stupid enough to buy it.”

While Dimon is still not interested in the subject of bitcoin, he is all praise for the blockchain technology.

The CEO told Fox Business today, “The blockchain is real. You can have crypto yen and dollars and stuff like that. ICO’s you have to look at individually.”

Jamie Dimon image via CoinDesk archives

The leader in blockchain news, CoinDesk is an independent media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. Have breaking news or a story tip to send to our journalists? Contact us at news@coindesk.com.