As a researcher with a background in finance and blockchain technology, I find JPMorgan’s CEO Umar Farooq’s comments during the BIS Innovation Summit insightful and reflective of the current state of public blockchains. Based on my understanding of the technology and the financial industry, I agree with his assessment that public blockchains are not yet ready to handle large-scale transactions.
Based on JPMorgan’s assessment, public blockchains currently lack the capacity to handle a large volume of transactions effectively.
At the BIS Innovation Summit held on May 7, Umar Farooq, the head of JPMorgan’s Onyx blockchain payment system, made the following statement:
“I think you almost need something like [a Unified Ledger]. I mean, it’s actually almost a necessity because if you look at … public blockchain ledgers, they are not fit for purpose for large transactions today.”
As a crypto investor, I’ve been keeping a close eye on recent developments at the Bank for International Settlements (BIS). Last year, they introduced something called the Unified Ledger. This concept is designed to streamline central bank money flows, enable tokenized deposits, and manage digital assets within their network. In response to this innovative proposal, the CEO shared his thoughts on how it could potentially reshape the financial landscape.
If a $100 million transaction were to fall through, validators on the public blockchain would not be liable for the outcome.
“Who do I sue?… You need to get somewhere where people can do trusted transactions between financial institutions with some sort of accountability in the system.”
In contrast to the CEO’s disparagement, JPMorgan’s exclusive Onyx platform is constructed as a private variation of Ethereum, the globally recognized second largest public blockchain system. A key distinction between this setup and open blockchains is that Onyx permits institutions to revoke transactions.
In addition, Farooq from JPMorgan pointed out that cryptocurrencies launched on open blockchains can create distorted incentives intended to attract more network users and increase the value of the coin. He emphasized that blockchain technology, similar to the Internet, should be regarded as a common resource for all.
“We need to get to an evolution point where the technology starts to be seen as a public good versus as a means to enrich.”
TradFi firms prefer public blockchains, says ex-Grayscale executive
As a financial analyst, I’ve noticed that despite facing significant critique, conventional financial institutions have shown a preference for tokenizing their assets on publicly accessible blockchains.
As a crypto market analyst, I had the opportunity to engage in a conversation with Celisa Morin, formerly Vice President of Platform Distribution at Grayscale, during which she shared her insights regarding BlackRock’s recent move. According to Celisa, this initiative could potentially encourage more Traditional Finance (TradFi) institutions to tokenize their assets on public blockchains instead of private ones. This shift might result from the increased appeal and transparency offered by public blockchain networks.
“I think we see a preference for private chains with JPMorgan’s Onyx. But I do think that this was the narrative a few years back. Now, I think it’s very much the public blockchains.”
Morin spoke about BlackRock’s newly established $100 million “BUILD” fund based on tokens, debuted on the Ethereum platform on March 18th.
According to Dune analytics, the BUIDL fund managed by BlackRock currently has over $382 million in assets, making it the biggest tokenization fund globally.
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2024-05-08 17:53