Widening Appeal to Other Banks
Quorum Seeking Independence
It seems that JPMorgan Chase is considering forming its Quorum blockchain as a separate company in order to widen its appeal to other financial institutions.
Quorum, an open-source project, was launched in 2016 as a permissioned version of ethereum. It also be used to send and receive cross-border payments and JPMorgan debuted the project at the annual Sibos conference.
According to Reuters, a JPMorgan spokesperson declined to “comment on speculation” regarding the supposed move, but said that “Quorum has become an extremely successful enterprise platform even beyond financial services and we’re excited about its potential.”
Product development for Quorum has been led by Amber Baldet, an executive director of the bank’s Blockchain Center of Excellence. Baldet could decide leave the firm and start a new venture, join the spun-off entity or stay at the bank, the source said.
Banks have been spending billions on the technology hoping that it can help them cut costs and simplify some of their processes, ranging from international payments to the settlement of securities trades.
JPMorgan was among the banks that left blockchain consortium R3 last year, while a partnership between Belgium-based settlement provider Euroclear and U.S. startup Paxos to develop a blockchain-based service for the London gold market was dissolved in July.
Quorum as the Standard of Wall Street
Caitin Long, the Morgan Stanley veteran now prominent in the blockchain community, says that the JPMorgan’s goal for Quorum was “to become the standard of Wall Street”. She also noted that it may be the lack of traction outside the bank that may have forced its hand. “Blockchains only work if there are network effects; it doesn’t make sense if banks are using it only internally,” said Long.
The bank’s disclosure follows a similar admission by rival Bank of America in its own annual report last week. In that filing, Bank of America noted the potential risk of customers leaving for competitors offering products and services “in areas we deem speculative or risky, such as cryptocurrencies.”
Bear in mind that JP Morgan wasn’t always blockchain and crypto-friendly. Last year their CEO Jamie Dimon called Bitcoin “a fraud” and then adding that “if you’re stupid enough to buy it, you will pay the price for it one day.”
However, in February this year, JP Morgan, released a 71 page-long detailed document about Bitcoin titled “Decrypting Cryptocurrencies: Technology, Application, and Challenges.” The authors wrote that if cryptocurrencies survive the next few years and remain part of the global market, then they will likely have exited their current speculative phase and would then have more normal returns, volatilities (both much lower) and correlations (more like that of other zero-return assets such as gold and JPY).