(Yicai Global) April 24 -- Wall Street banks are plowing billions of dollars into blockchain, the tech behind cryptocurrency bitcoin, after China seeded investment in digital currencies before banning them outright.
JPMorgan Chase & Co. has begun testing a new blockchain platform to issue financial instruments in tandem with the National Bank of Canada and other leading firms, Reuters reported on April 20. The tools aim “to streamline origination, settlement, interest rate payments and other processes.”
“What we’re doing is jumping into blockchain,” Jim Glassman, head economist for commercial banking at JPMorgan, told Yicai Global in New York on March 28. “I always thought [the current transaction process] was an efficient system, but when I went to wire some money to Pennsylvania, it took a long time to make the transaction happen. It tells you the financial system is old fashioned still.”
Glassman also talked of fear among bankers that the rise of fintech companies could displace traditional financial institutes. “It’s easier for [banks] to adapt to technology than for [fintech firms] to steal customers,” he added. “But it poses all these questions, [banks] have to deal with the regulators and there are so many regulations.
The technology grants more opportunities to Wall Street, added Han Feng, co-founder of Elastos, the operating system backed by blockchain technology. “It gives them more opportunities to make money. Data becoming an asset means Wall Street will need to manage more assets and capital.”
“I always thought the big driver of cryptocurrencies was Chinese investors,” Glassman added. “Because it’s a way of getting money out of yuan and into other currencies, that’s the appeal. And the Chinese government might be very nervous about this, I don’t know how much they can restrain it.”
China banned cryptocurrency trading in September and forced exchanges to move overseas, with Sheng Songcheng, an advisor to the People’s Bank of China, saying at the Boao Forum for Asia this month that there was no place for blockchain in the financial world.
But Chinese firms are still pumping money into the technology, with some of the country’s biggest tech firms, Alibaba Group Holding Ltd., Tencent Holdings Ltd. and others using blockchain to track agricultural produce and imports from their origin. State-level new area Xiong’an is even using the technology to prevent landlord fraud.