Banking giant JPMorgan Chase has begun the trial of a blockchain project that may prove to be a landmark endeavor in bringing cost-cutting and easier trading to the banking industry. The blockchain project is facilitated by the bank’s collaboration with blockchain-startup Digital Asset Holdings (DAH).
The two companies are looking to introduce distributed ledger or blockchain technology to the current financial industry. One of the immediate uses of the trial project is to address liquidity mismatches in JPMorgan’s loan funds, as revealed by the Financial Times on Sunday.
Speaking to the publication, Daniel Pinto, head of JPMorgan’s investment bank noted that loans were a good sector for blockchain technology to be trialed. He sees the current loan system as one where “the settlement process is complex with lots of manual intervention and multiple parties.”
To sell a loan is a very cumbersome, time –consuming process; settlement can take weeks.
JPMorgan is the lead investor in Digital Asset’s recent closure of a recent funding round that exceeded $50 million from 13 firms. Banks, stock exchanges, clearing houses and other players in the banking ecosystem were among the 13 investors.
The financial institution was picked out as one of two banks –along with Goldman Sachs—to gain from blockchain technology replacing traditional banking methods in a recent industry survey that polled some 150 executives and investors in the banking sector.
Suffice to say, the biggest US bank by assets is investing heavily in distributed ledger technology. A recently leaked internal JPMorgan memo revealed that the bank has plans to invest some $9 billion in technologies such as the blockchain and robotics.
JPMorgan is also involved in the Open Ledger Project, an open-source distributed ledger project headed by the Linux Foundation. The project is expected to bring uniformity in distributed ledger standards that could potentially be adopted by the banking and financial industry as a whole.
Speaking to FT, Pinto was clear about his take and the bank’s approach to exploring blockchain technology.
Blockchain will be big in everything related to settlement, and not just loans. While it is still early days, the technology looks very good.
Bitcoin’s underlying technology, the blockchain, has had a mammoth year in 2015 with investments and interest from banks, governments and private enterprise around the world. 2016 is shaping up to be the year when blockchain technology powers real-world platforms and provides tangible solutions. In January 2016, a private blockchain experiment spanning 11 banks across four continents was revealed by blockchain startup R3, which also sees JPMorgan as one of its participating member banks.
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