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A new JP Morgan blockchain platform is being used to “tokenise” assets, essentially digitizing assets in a way never done before, and one of those assets is gold bars. As the world’s largest bank by market capitalization, JP Morgan is looking to pave the way by implementing blockchain technology that is increasingly being seen as a game-changer in the FinTech industry.
Other banks have been criticised for charging unnecessary fees to customers using cryptocurrencies, in what some see as a “punishment” for moving away from traditional finance, it looks like JP Morgan isn’t going to be in this group as it continued to embrace blockchain.
Although blockchain technology was originally created for Bitcoin and has since been used to support a multitude of other emerging cryptocurrencies, the technology’s applications are widespread. We are increasingly seeing blockchain being used for different purposes, and now even the major investment banks are using it to manage global liquidity and improve their information fallbacks. JP Morhan’s CEO Jamie Dimon did refer to Bitcoin as a fraud last year, but now takes back that statement, adding that “blockchain is real.”
For this task, JP Morgan has used an enterprise version of the Ethereum blockchain, called Quorum. Quorum allows for smart contacts, which are self-executing contracts where the rules defined by the buyer and seller are written directly into the code.
This is a major change in how assets are currently traded, in which an intermediary party is normally involved, such as a broker or an exchange. Tokenising the assets means they will be digital and move directly between parties without the need for a middleman.
Tokenising Gold and Other Assets
JP Morgan’s New York-based head of blockchain initiatives, Umar Farooq has stated that there are people using Quorum to tokenise gold. Adding to this he said:
“They wrap a gold bar into a tamper-proof case electronically tagged, and they can track the gold bar from the mine to endpoint – with the use case being, if you know it’s a socially responsible mine, someone will be willing to pay a higher spread on that gold versus if you don’t know where it comes from. Diamonds is another example.”
The technology could potentially revolutionize how many assets are handled, it’s started with gold but art, precious metals, machinery and infrastructure could soon be traded through blockchain. This future isn’t as far off as you might think.
Interbank Information Network
JP Morgan has also created the Interbank Information Network, of which over 100 banks are involved, which uses blockchain to enhance payment information. The National Bank of Canada recently used Quorum to issue a certificate of deposit to US investors, showing that there is growing interest in the technology among high authority institutions.