Will blockchain find favor in financial services — and help kill the check?
To that end, in further evidence that blockchain is gaining traction with traditional financial institutions (FIs), news came this week that J.P. Morgan has created a new unit focused on blockchain and digital currency.
As noted in this space on Tuesday (Oct. 27), the unit, known as Onyx, will be staffed by 100 J.P. Morgan employees.
In an interview with CNBC, Takis Georgakopoulos, who helms global wholesale payments for the bank, said, “We are launching Onyx because we believe we are shifting to a period of commercialization of those technologies, moving from research and development to something that can become a real business.”
J.P. Morgan launched JPM Coin late last year, geared to wholesale payments, and said this week that it has a paying client in place.
In terms of the mechanics of the digital coin, J.P. Morgan has said the JPM Coin is not in fact money, per se. The coin represents U.S. dollars held in designated accounts at J.P. Morgan Chase N.A.
The launch was confirmed via Twitter by Christine Moy, who leads blockchain projects for the company.
Cutting Down On Cutting Checks
Against a larger backdrop, “We’re talking about hundreds of millions of checks being sent,” Georgakopoulos told CNBC. “Using a version of blockchain with the participants being the main issuers of checks and the main operators of lockboxes, it’s possible we can save 75 percent of the total cost for the industry today, and make checks available in a matter of minutes as opposed to days.”
And, here it is blockchain that seems squarely in J.P. Morgan’s sights. Moy is, Coindesk reported, leading the Ethereum based Interbank Information Network, and the company has said more than 400 banks have joined that network. The network is focused on information sharing between FIs in a bid to minimize cross-border friction in international payments.
We note that information flows across borders have long been in sight when it comes to interbank and cross-border activity, across trade finance and the custodial services that help institutions mange cash flows. In a wider example of banks intersecting with digital currencies (beyond J.P. Morgan and its coin), earlier this year, the Office of the Comptroller of the Currency said that national banks and federal savings associations can provide crypto-related custodial services for clients.
In one recent example of using new, and shared, infrastructure to streamline transactions, in an interview with Karen Webster, Ternio Co-Founder and COO Ian Kane and Daniel Gouldman, co-founder and CEO, said blockchain is coming to legacy financial providers (in turn enabling retail use cases too). Ternio said it has joined Visa’s Fast Track as a cryptocurrency-focused enablement partner, which means it will help crypto companies and FinTechs come to market with crypto payments that ultimately ride the Visa rails.
According to a J.P. Morgan report from earlier in the year, “2019 will be remembered for the rise of digital money,” the bank said in the report, as cited by Bloomberg. “The groundwork is now in place for more mainstream adoption of blockchain technology at the same time that the foundation is being established for the development of digital currency and fast payments.”
Beyond the currencies, the coins, the stablecoins, and cryptos that ride the rails … the rails themselves, via blockchain, may help modernize cross-border financial services.