J.P. Morgan, the biggest of the top four U.S. banks is gearing towards heavy applications of blockchain technology. This is at odds with its CEO, Jamie Dimon’s stand on Bitcoin, which he has referred to as a fraud in the past. In fact, at an investors meeting in September 2017, Dimon compared Bitcoin cryptocurrency to theDutch Tulip Mania of the 1630s.
The Tulip Mania was an era in which the price of Tulips was driven by speculation, creating a bubble in which Tulips became obscenely expensive, yet useless assets. This comparison shows that Dimon views Bitcoin as a bubble. He also threatened to fire any Chase Bank staff found trading Bitcoin on company accounts.
The Chase Bank CEO is not the first big executive officer to vocalize his negative views on Bitcoin. Several large investors, founders and chief executives have gone on record to call the cryptocurrency a bubble, comparing it to the Dotcom Era. Warren Buffett, George Soros, Mark Cuban, Peter Schiff, Steve Wozniak and Jack Ma are a few examples.
Despite this bearish opinion on Bitcoin, one thing all of these executives have in common is their shared belief in the potential of blockchain, the technology that powers Bitcoin. The blockchain is an immutable ledger which records all the transactions carried out on a network so that they can easily be verified at any point in future. As simple as this may sound, several industries are in need of such a solution, especially where supply chains and payment transactions are involved.
The applications of blockchain technology are so far-reaching that they can potentially touch every industry from real estate to art. As long as transactions need to be carried out securely and efficiently, the technology can be applied. This is why its biggest applications are in the finance industry where money is dealt with and managed directly.
Like the other Bitcoin bears who call the cryptocurrency a fraud and bubble, Jamie Dimon also believes that blockchain technology can disrupt the industry in a positive way. In fact, J.P. Morgan has been experimenting with the technology since 2015 in a bid to develop banking solutions that make life easier for individuals, businesses and even other financial institutions.
WHO IS JAMIE DIMON?
Jamie Dimon is the Chairman and CEO of J.P. Morgan Chase, the largest bank in the United States. Over the years, he has built a solid reputation as a seasoned entrepreneur and founder with a deep knowledge of the banking industry, especially as it relates to investing.
Before his foray into Chase bank in 2004, Dimon worked at American Express, immediately after his graduation from Harvard Business School in 1982. There, he worked under Sandy Weill, the former CEO and Chairman of Citigroup.
Following tensions within the company, Weill and Dimon left in 1985 to take over Commercial Credit, a consumer finance corporation. While there, Jamie Dimon served as the chief financial officer until his departure from the company which had been merged into Citigroup in 1998.
After his time at Citigroup, Dimon served as the CEO of Bank One, the fifth largest bank in the country at the time. Following a merger between Bank One and J.P. Morgan Chase, he became the Chief Operating Officer of the merged company. In 2004, J.P. Morgan Chase announced Jamie Dimon as its CEO and since then, he has achieved several milestones while taking the bank to its current position as the largest bank in the U.S in terms of domestic assets, market valuation and share price.
WHAT ARE JAMIE DIMON’S BELIEFS ON BLOCKCHAIN?
Apart from his positive opinion on the potential of blockchain, Dimon believes that cryptocurrency will possibly disrupt the banking business, especially the newer forms of digital payment like Paypal, Alipay, and Venmo.
According to the J.P. Morgan chief executive, these new payment companies have done a good job of embedding banking services in the social and shopping experience of the average person. He believes that blockchain will disrupt this market and J.P. Morgan has been making plans to get ahead of this impending disruption.
Although Dimon does not support cryptocurrency due to its unregulated nature and notoriety as a means of exchange for illicit purposes, he views blockchain as a separate entity. This is why even though he holds firm beliefs against cryptocurrency as a whole, J.P. Morgan has embraced the implementation of the technology to create banking solutions.
In fact, in May 2018, the bank announced the creation of a “head of crypto assets strategy” position which they have already filled. They have also filed a blockchain patent for their newly developed payment solution.
WHAT IS THE JPMORGAN BLOCKCHAIN PATENT?
The J.P. Morgan blockchain patent details a newly created system, known as the Interbank Information Network, which will make it easier for users to make cross-border payments. The Royal Bank of Canada and Australia and the New Zealand Banking Group will partner with J.P. Morgan Chase on this project.
Currently, the process of making such payments is time-consuming and can be highly inconvenient. This is because money sent from one country to another passes through several third-party financial institutions en route to its destination.
This means that there must be continuous communication in the form of messages being sent between the different parties. As a result, the user may be left out of the loop in a process that may drag out for days and even weeks. Using Distributed Ledger Technology (DLT) like blockchain, users will be able to verify their payments between all the financial institutions it passes through.
Payments will also be processed in real time with total traceability on the parts of both the sender and recipient. This system has the potential to save both time and cost while eliminating the restriction to funds that users may face otherwise.
Although this patent was filed in May 2018, this is not J.P. Morgan’s first blockchain-related project. In 2015, the company created an open-source, enterprise-facing network known as Quorum, to solve the issue of data privacy. The project was created on the ethereum network, supported by ether, the network digital asset.
Recently, the bank partnered with the developers of Zcash, a privacy-related cryptocurrency. J.P. Morgan Chase is also one of the founding members of the Enterprise Ethereum Alliance (EEA), a community that works to encourage problem-solving and mainstream adoption of blockchain technology using the ethereum network.
FINAL THOUGHTS
Since the emergence of Bitcoin, corporate executives within the finance industry have had mixed opinions on its validity. While some are bullish on its behaviour, others have called it a bubble and fraud with no intrinsic value. Among these non-supporters is Jamie Dimon, the CEO of J.P. Morgan Chase who has openly called the cryptocurrency a fraud.
However, most of these executives agree that blockchain, the underpinning technology of Bitcoin is set to be a major catalyst for technological advancement within the industry. J.P. Morgan has decided to put their money where their mouth is by creating blockchain-driven solutions to industry issues. Like IBM, Amazon and other large corporations, the bank has created a peer-to-peer distributed ledger technology system that will make cross-border payments easier to carry out.
The system will reduce the transaction time and costs of these payments by eliminating third-party involvement and allowing users to verify and track their transactions on the blockchain. If successful, the system, known as the Interbank Information Network will serve as a major milestone in the way banking is done on a global scale.
This article was originally published at MintDice.