JPMorgan’s BlockChase: Dallying On Blockchain And Web 3
JPMorgan has always been on a quest to embrace disruptive trends as the traditional banking industry gets challenged with emerging technologies and evolving business models. Despite being an incumbent bank, the financial goliath has never shied away from diversification and experimenting with modern technology as is evident from their innovation and investment strategy. In 2015, the Wall Street Bank made its first attempt to foray into the blockchain industry, when it partnered with eight other banks including Barclays and BBVA to form a consortium led by R3. In our previous post, we explored the Goliath’s Resurgence by taking a look at its FinTech playbook. In this post, we add a crypto twist to this playbook by seeking the goliath’s tryst with the crypto phenomenon across the themes of blockchain, cryptocurrencies, NFTs, and the metaverse.
2015-2019: Betwixt and Between The Crypto Craze
JPMorgan’s association with blockchain can be traced back to Feb 2016 – when the bank began a trial test of the technology similar to one that underlies bitcoin – by tapping into Digital Asset Holdings. The following year, they launched their own blockchain, Quorum, hoping to explore potential ways the DLT might help accelerate the rate it transacts business. However, the bank's courtship with the consortium was short-lived – as the following year JPMorgan parted ways with R3 in a bid to pursue a separate technology path. Although Jamie Dimon, CEO JPMorgan, claimed bitcoin to be “a fraud that will ultimately blow up”, the launch of Interbank Information Network (IIN) – a new interbank payments platform built on Quorum to enhance the client experience – was proof enough of the banking behemoth’s love for blockchain. In 2018, JPMorgan unveiled Dromaius, a prototype designed to test the use of the Ethereum blockchain technology. Additionally, the Wall Street bank became a strategic investor in enterprise blockchain startup Axoni through its $32M Series B investment. In 2019, in a bid to facilitate transactions between institutional clients, JPMorgan launched the JPM Coin, a digital token representing fiat currencies that uses blockchain technology, for transfer of payments. The same year, JPMorgan partnered with Microsoft to become the first distributed ledger platform available through Azure Blockchain Service – enabling customers from both the platforms to build and scale blockchain networks in the cloud.
2020: Un-Blocking Innovations
Nonetheless, JPMorgan’s crypto plans were not limited to stablecoins only. In 2020, the banking giant was in talks to merge its Quorum blockchain with an Ethereum-based blockchain startup – ConsenSys. Around the same time, JPMorgan also started providing cash-management services, and agreed to handle dollar-based transactions for US-based customers of Coinbase and Gemini. The following few months were witness to some of the key events in JPMorgan’s crypto journey. The banking behemoth sold its blockchain Quorum to ConsenSys. On October 27, 2020, JPMorgan – for the first time – saw its JPM Coin being commercially embraced by a large tech client for global payments. Within 24hrs of this event, the banking firm launched their second blockchain, Onyx, with the aim to capture a major shift towards digital currencies in the financial services industry.
2021: Embracing Cryptonomics
JPMorgan’s eagerness to hop onto the crypto bandwagon was out-front when it launched the cryptocurrency exposure basket of bitcoin proxy stocks in March, 2021. Furthermore, JPMorgan also invested in blockchain firms ConsenSys and HQLAx, along with world’s largest blockchain infrastructure company Blockdaemon. The banking giant’s ambition to revolutionize the payment sector using blockchain technology didn’t stop there. JPMorgan, along with DBS Bank & Temasek, created Partior – a joint venture aimed towards developing a wholesale blockchain-based payment network targeted at cross border transactions. In a pivotal move to digitize transactional activity, Goldman Sachs initiated trading digitized treasury bonds for JPM Coin on JPMorgan Chase's Onyx blockchain platform. Despite criticizing Bitcoin and discouraging people to invest in them, JPMorgan itself was one of the first major US banks to provide its wealth-management clients with access to Bitcoin and other cryptocurrency funds. The following month, they unveiled another Bitcoin fund created with crypto firm NYDIG, allowing financial advisors to begin placing private bank clients in it. Towards the end of the year, JPMorgan held its first “Crypto Economy Forum for TradFi Investors" event at the bank’s New York headquarters, where it distributed NFTs minted on Ethereum layer 2 network Polygon.
2022: Marching into the Metaverse
The year 2022 seems to have begun with quite the positive development for the banking giant. The Central Bank of Bahrain completed a test of the JPM Coin with Onyx, allowing Bank ABC to launch real-time payments for Aluminium Bahrain (ALBA) in the US. What’s more – the banking behemoth also forayed into the metaverse by launching the Onyx lounge in Decentraland, alongside a paper explaining how businesses could find new opportunities in the virtual world. Recognizing the security threats to blockchain networks with the addition of more players into the platform, JPMorgan, along with Toshiba and Ciena, successfully tested new encryption networks that can be used to protect communications on the blockchain – while also investing in blockchain intelligence firm TRM Labs. This just goes on to show that although cryptocurrencies have been subject to skepticism and contempt by JPMorgan’s leadership initially, it did not stop the company from embracing the technology behind it and evolving as per market demand; with the institution time and again banking on blockchain, crypto, and other web 3 trends towards the continued evolution of the banking industry.
It goes without saying that the experimentation with technology behind cryptocurrencies by the Wall Street bank is a welcome change, and the many giant leaps taken by the banking behemoth to make its mark into the next phase of the decentralized world has been turning heads across sectors and industries. What new venture the firm will next embark on, only time will answer.