In recent years, the US banking giant Morgan Chase Bank has invested heavily in the application of blockchain technology. It is a frequent action, trying to solve the development momentum of traditional banking industry through blockchain technology, improve efficiency, reduce costs, and compete in the latest wave of technology. Keep the advantage.
JP Morgan Chase Cryptography is designed to simplify the proxy mode
At present, coordination between different financial institutions between traditional financial institutions is often done manually, and the process of coordination is generally opaque and costly. According to JPMorgan Chase, the blockchain can significantly simplify the proxy line in the payment process, and the investment bank's front-end process and operating system can save about $10 billion annually.
Although starting time is not the earliest, JP Morgan Chase has been actively introducing external talents and partners since 2015 and has chosen a more pragmatic technical route. In March 2016, JPMorgan Chase demonstrated the distributed encrypted ledger Juno, which supported the smart contract Hopper through the private ledger network, but with the developer's departure.
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In October 2016, JPMorgan announced that it has partnered with startup EthLab to develop Quorum, a private blockchain platform based on Ethereum, which provides privacy for participants while allowing regulatory agencies to obtain transaction data. This blockchain platform is open to other companies and encourages other companies to use this platform to develop their applications. Currently, Louis Vuitton, Starbucks Coffee, State Agricultural Insurance Company, USAA Insurance Company, VAKT and IHS Marquette have used this platform to develop blockchain applications, and JPMorgan Chase has used this platform to develop banks. Information network system and JPM Coin. In order to attract more companies to use the Quorum platform, JPMorgan Chase is squandering the platform and retaining only a small shareholding.
In April 2017, JPMorgan Chase retired from the R3CEV blockchain alliance created in 2014 and pursued its own blockchain technology route. In October 2017, JPMorgan submitted a patent application to the US government for its use of blockchain technology services such as distributed ledgers and technology for facilitating financial transactions.
In October 2017, JPMorgan Chase and RBC and ANZ announced the establishment of the Interbank Information Network System (INN), an idea designed to leverage blockchain technology to optimize and improve global payment processes and resolve payments between banks. Information sharing on the issue to improve transaction efficiency. The interbank information network system will seek to reduce the number of required participants, which are used to meet various compliance and data related requirements, slowing down the payment process.
At present, 259 banks have joined the inter-bank information network system, and China Dalian Bank, Nanjing Bank, China CITIC Bank, Guangfa Bank, Zheshang Bank, Shanghai Rural Commercial Bank and Nanyang Commercial Bank have also joined this platform. JPMorgan also plans to increase domestic and cross-border remittance transfers in the third quarter of 2019 to compete with TransferWise and Ripple. The latest features will enable banks to verify the information of remittance recipients in real time, reducing transaction delays caused by data errors. It is understood that 5% to 20% of transactions in remittance transfer transactions are currently not available for bank release. JPMorgan also plans to launch test sandboxes for financial technology companies in the third quarter of 2019 to help fintech start-ups use the platform to develop applications.
On February 14, 2019, JPMorgan Chase announced plans to launch its own digital cryptocurrency, JPM Coin, to help users achieve timely transfer payments through blockchain technology, and JPMorgan Chase became the first US bank to announce the launch of its own cryptocurrency. At present, JPMorgan Chase is testing this. It is expected to be launched to its institutional users in the second half of this year. JPM Coin will be linked to the US dollar. JPMorgan will issue the corresponding amount of cryptocurrency according to the asset items of the user account. The user first transfers and pays. The transfer of cryptocurrency will be implemented on its blockchain platform Quorum, which will then be converted to US dollars. It is expected that this application will be released to some users by the end of 2019, which will save users settlement time, reduce counterparty risk and settlement risk, and reduce capital requirements. However, the launch of this product will still depend on the approval of the regulatory body.
In addition, JPM Coin will also be available for bond and commodity trading. Umar Farooq, head of digital finance services and blockchain at JPMorgan Chase, said that JPMorgan Chase's users in Europe, the US and Japan expressed interest in using digital cryptocurrencies to increase transaction speed and reduce costs. He said that this technology is very good, but qualification and licensing will take time.
According to industry analysts, JPM Coin will be inseparable from JPM Coin and will be subject to supervision, while JPMorgan Chase will control JPM Coin's books through a private blockchain platform. This cryptocurrency will be the same as stable currency. Because it is expected to be used only for transactions between JP Morgan Chase users, this cryptocurrency has a limited range of applications compared to other cryptocurrencies and individual investors will not be able to participate.
JPMorgan Chase said that it hopes that JPM Coin's anchoring scope can be extended to other currencies in the future, and it is planned to cooperate with regulators to promote the application scope of JPM Coin.
On May 2, 2019, JPMorgan Chase announced a partnership with Microsoft's cloud computing platform, Azure, to support the use of Quorum's blockchain applications. Technicians can use Azure tools to develop and test blockchain passwords, which can be managed by the Azure cloud computing platform. The time for companies to develop blockchain verification concepts in Quorum will be reduced from the previous six months to around six weeks. Quorum became the first blockchain platform for Azure cloud computing platform access.
JPMorgan Chase, an industry insider familiar with the blockchain and cryptocurrency, said that compared to Facebook’s innovative technology companies, JPMorgan Chase may be far less competitive in implementing technological innovation, but JPMorgan is well acquainted with the banking industry. Regulatory requirements and the environment may make it easier to obtain regulatory release by introducing blockchain applications that are more pragmatic and close to actual demand.
Compliance, market and technical barriers coexist
JPMorgan Chase Bank's "Blockchain and Distributed Revolution" report, released in May 2018, argues that the main short-term barriers to blockchain applications include investment in new system infrastructure, technical barriers and security concerns. The industry needs to make trade-offs between recent investment and long-term revenue. The large-scale application of blockchain technology, data privacy, technology standardization, execution speed and compatibility with existing systems face certain technical challenges, and are well known. Encrypted currency issues can affect people's perceptions of security risks.
In May 2017, NASDAQ and Citibank Finance & Trading Solutions announced that they will jointly launch a new integrated payment solution for private equity transactions, enabling direct payment processing and automatic coordination through distributed ledgers. However, the two companies did not continue to promote this project. The reason is that although this solution is successful in testing, the security costs of implementation will outweigh the benefits.
The JPMorgan Chase report believes that in corporate finance, blockchain can be applied in supply chain, financing and payment and clearing. In the supply chain, the blockchain creates auditable and shared transaction records that provide assurance and certification products for the supply chain. In terms of financing, the blockchain can improve the connectivity of issuers and capital providers in existing capital markets through decentralization and process contract execution; use digital assets to create distinctive new capital. In terms of payment and clearing, the blockchain can provide transparent trading for all market participants and reduce the clearing time to T+0 level; verifying transactions through the blockchain network can significantly reduce counterparty risk; avoiding intermediary execution payments Instructions can reduce transaction costs.
However, the application of blockchain technology in the payment sector still faces multiple short-term obstacles, including the need to establish new standards and processes for regulatory and judicial compliance standards; anti-money laundering requires the establishment of anti-money laundering standards for decentralized networks.
JPMorgan Chase said that despite the rapid development of blockchain and distributed ledger technology, this technology is still in the process of maturity. As cryptocurrency becomes more and more an asset class and increasingly attracts the interest of asset management managers, the application of blockchain technology by enterprises is largely at the stage of proof of concept.
JPMorgan believes that since 2015, the industry has been evaluating blockchain technology, technology providers and companies have begun experimenting with technology, and infrastructure intermediaries in the banking and finance sectors have begun to discuss and research blockchains; from 2016 to 2020 In the year, it will be in the period of blockchain technology prototype and pilot project operation. There are many entities such as alliances, own technology companies and open source agreements. Banks and technical facilities intermediary companies have introduced verification concepts to verify and decide on blockchain technology. Its value and scalability; from 2018, there has been an island of blockchain technology applications. The blockchain solution is mainly around a few suppliers, and the concept of successful verification and pilot projects have begun to enter the market; It is still uncertain when the industry will be familiar with blockchain technology and have confidence, and when blockchain technology will replace the centralized control infrastructure to achieve complete decentralization.
Christine Moy, head of the JPMorgan blockchain center of excellence, said that the National Bank of Canada used the JP Morgan Chase blockchain platform to issue a $150 million one-year floating rate US dollar term deposit as an example of the issuance of traditional financial products on the blockchain platform. The first phase will be that the asset management manager is really involved in these product transactions.
On April 10, 2019, JPMorgan Chase CEO Jamie Dimon said in a US Congress hearing that, considering the experiments and tests that have been and are being carried out, JPMorgan believes that blockchain technology will evolve over time. Can play a role.
Reuters has sorted out 33 blockchain-related projects announced by large companies over the past four years and found that at least a dozen projects involving large banks, exchanges, and technology companies have not gone beyond the testing phase, and those that have completed testing. The project has not yet entered the widespread application phase. Some senior executives say that regulatory barriers often slow down the pace of project implementation. After Facebook’s Libra cryptocurrency program is resisted by global regulators and politicians, the blockchain project is likely to be reviewed. increase.
For example, the blockchain payment system announced by Deloitte and SETL in 2016 and the blockchain project jointly announced by IBM and Mitsubishi UFJ in 2016 did not continue, and the Australian Stock Exchange recently indicated that it will be planned in 2021. Introducing blockchain-based technology to replace its original securities clearing and settlement system, the American Depositary Trust Clearing Company is expected to launch a blockchain-based trading information warehouse this year. In addition, the American Insurance Service Association has launched a blockchain-based data reporting system, but it has not yet been widely used; the US foreign exchange settlement giant CLS announced in 2018 that it will launch a blockchain-based payment network service CLSNet, and there are many The bank has joined.
Zlata Baldekova, head of the New York City Block Chain Center, said that cryptocurrencies such as JPMorgan Chase and Facebook Libra are in the initial stage. Before the official launch, many obstacles such as supervision must be overcome. At this stage, new initiatives are not set up. Wait and see.
Hyder Jarrey, who is responsible for strategic investment in the investment banking division of UBS, said that blockchain applications are transforming the market rather than a big-bang mutation. It is expected that major blockchain projects will have a significant impact. 7 years.
John Whelan, head of digital investment at the National Bank of Spain, said that the blockchain project needs to be promoted simultaneously in terms of technology, market demand and compliance. Even if it is involved in this field very early, it may be difficult to find that the three can be well integrated. .
Reporter: Liu Yanan