For years, multinational investment bank JPMorgan Chase has had an incestuous relationship with cryptocurrencies. While it maintains a decidedly indifferent attitude towards Bitcoin and similar products, the financial institution has publicly embraced blockchain technology and is actively using it in various internal projects.
In August 2018, CIO Lori Beer made bold statements in an interview claiming that blockchain technology will replace the current financial system in the coming years, which has come to the fore.
Beer's sentiment comes at an interesting time, especially given JPMorgan's yin and yang approach to decentralized ledger technology (DLT).
Blockchain technology underpins the existence of cryptocurrencies, the number and application of which has increased exponentially since the creation of Bitcoin in 2009. As such, it's worth taking a glimpse down memory lane to understand the juxtaposition between the company's approach to cryptocurrency and blockchain technology.
JPMorgan Chase's Love/Hate Relationship with Crypto
- As is the case with most financial institutions, the emergence of cryptocurrencies has been met with a certain amount of panic. Some are more receptive than others, but JPMorgan Chase has a more interesting story.
- The company isn't overly opposed to the concept of cryptocurrency, but its leadership - particularly CEO Jamie Dimon - has been hyper-critical over the past few years. As we will delve into, this gives rise to a starkly contrasting narrative in terms of the company's projects and use of space compared to Damon's view.
- In November 2016, JPMorgan Chase released a white paper on Quorum, a private blockchain platform based on the Ethernet protocol.
- As a founding member of the Enterprise Ether Alliance (EEA), JPMorgan's Quorum development aligns with the EEA's mission to bring privacy, scalability and security to the Ether blockchain. This is aimed directly at businesses that want to control the accessibility and use of their data through a blockchain system.
- Quorum's blockchain looks to provide data privacy for companies, using the Ethernet network to verify transactions, as described in the opening paragraphs of the white paper.
"While the design is simple, the solution retains many of Ether's key attributes, such as ensuring that every node on the network participates and improving the overall security of the entire network, while revealing details of private transactions only to those participants. The deal. "
- Quorum uses encryption to protect sensitive data by allowing only those with the necessary permissions to access certain transaction data.
- Almost a year and a half later, on April 20, 2018, JPMorgan Chase finally tested the Quorum blockchain and participated with a number of prominent banks.
- JPMorgan Chase is even considering separating Quorum from the company to make the platform more accessible to the market. The barrier to entry is that market competitors are unlikely to use a platform operated by a rival bank.
- As cryptocurrencies suffered a humiliating correction in the months following Bitcoin's record high in December 2017, JPMorgan Chase - and other banks - stopped processing cryptocurrency purchases with credit cards, citing the volatility of the market.
- As of the end of February, the bank filed its annual report with the U.S. Securities and Exchange Commission (SEC). The report adds cryptocurrencies to its "Risk Factors" and "Competition" sections, illustrating the disruptive aspects of the sector.
- The firm told the SEC that the emergence of cryptocurrencies will require banks to spend more money to adapt their products to appease customers and clients, and that banks could eventually lose market share to.
"Financial institutions and their non-banking competitors are at risk that payment processing and other services could be disrupted by technologies such as cryptocurrencies, which do not require intermediaries."
- In May 2018, the company announced the creation of a head of crypto asset strategy at the firm. The position was immediately filled and Oliver Harris was tasked with leading the company's new cryptocurrency program. It is understood that Harris' position does not involve trading in cryptocurrencies, but rather investigating the use of cryptocurrencies and blockchain services that could benefit JPMorgan Chase's processes.
- Around the same time, vice president Daniel Pinto said the firm was investigating the bitcoin space - acknowledging interest in the futures market in an interview with CNBC. Pinto even said that if they had to clear bitcoin futures, while adding that cryptocurrencies face many challenges.
"I have no doubt that this technology will work in some way. [Regarding Bitcoin], you can't have something where the business proposition is anonymous, and it can't be a currency for unknown activities. It will be a very short life because people will stop believing in it, or regulators will kill it. I think the concept is valid [which is why] you have a lot of central banks looking at it. For me, the symbolization of the economy is real. Cryptocurrency is real, but not in its current form. "
- Chief Executive Officer, JPMorgan Chase Jamie Damon. Long a harsh critic of Bitcoin and cryptocurrencies。 Damon's opposition can be traced back to2015 year， At the time he said bitcoin would be stopped， And the blockchain“ Just like any other technology。” moreover， Damon made it clear that the bank would use the underlying technology to improve its own systems：
"If it's cheaper, more efficient, more effective, then we'll use it. The technology will be used and it can be used to transport currency - but it will be dollars, not bitcoins. "
- Dimon's most infamous bitcoin comment came in September 2017, when he labeled the cryptocurrency as a fraud. JPMorgan Chase's CEO even threatened to fire employees who offer cryptocurrencies on behalf of their clients.
- Damon's comments on the subject faded over the next few months, as his views on the industry seemed at odds with the company's plans. Dimon even said he would not comment on Bitcoin, while JPMorgan Chase took an "open" approach to cryptocurrency.
- Before the CME debuted bitcoin futures contracts in December, the company even considered facilitating trading futures.
- Nikolaos Panigirtzoglou, a global market strategist at JPMorgan Chase, further pushed the divide between the firm and the CEO and wrote in an investor report that the launch of bitcoin futures would drive the legalization of cryptocurrencies:.
"In particular, bitcoin futures contracts launched through established exchanges have the potential to increase legitimacy, thereby increasing the attractiveness of the cryptocurrency market to retail and institutional investors."
- Dimon seemed to change his tune in 2018, saying he wasn't interested in the topic in a January interview, while admitting he regretted his "fraudulent" comments in 2017.
- A few weeks later, at the World Economic Forum in Davos, Dimon told Cointelegraph that he was "not a cryptocurrency skeptic."
- After months of attention, Damon made headlines earlier this month when he reportedly called Bitcoin a "scam" before reiterating his disinterest in the topic during the concert.
- Quoting Damon, the government will take steps to shut down cryptocurrencies due to a lack of control over the space. This follows an interview with Harvard Business Review in which Dimon said JPMorgan Chase is testing blockchain technology for various applications within the company.
The Winds of Change
- Damon's headlines have somehow emerged from the work of global financial institutions.
- As mentioned earlier, the company's CIO Lori Beer has more accurately portrayed the company's stance on blockchain technology and cryptocurrencies.
- Her statement about the imminent adoption of blockchain and its global impact cannot be underestimated and appears to be a big driver of the JP Morgan Quorum project.
- As Beer said, the company needed to create a blockchain platform that would meet the needs of the company and its many customers.
"We are currently following many pathways. We invented a blockchain based on the open code of Ether. Actual blockchain technology has yet to address the privacy and scalability issues we need. We connect to Hyperledger and the Enterprise Ethereum Alliance. The application of this technology in business is more important to us than the technology itself. Not only do we need to reduce costs, but we also look for opportunities to develop new products. "
- The CIO also said that JPMorgan is "assessing" the current state of the cryptocurrency space, while making it clear that it will only support regulated markets and currencies.
- While this doesn't bring the company any closer to actively participating in the cryptocurrency market, its interest in blockchain development says a lot about the underpinning technology and its promise to the financial world.
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