It may surprise some people to learn that JPMorgan Chase is invested in the blockchain. Umar Farooq, a banker turned blockchain leader at JPMorgan, discussed how the bank is using the blockchain and didn’t shy away from bitcoin. He was speaking at the Yahoo Finance All Markets Summit for Crypto in New York earlier this week.
He spoke of “active engagement” with blockchain internally, as teams from across the bank’s operations are increasingly looking to distributed ledger technology as a possible solution to problems. Farooq’s at the head of that business, and he’s more open-minded about bitcoin than you might think.
He said that while the industry may say blockchain’s good and bitcoin’s bad, that’s now how JPMorgan, the top US bank based on assets, sees the world. “We all believe in blockchain good. I wouldn’t go as far to say cryptocurrencies bad. I would say and cryptocurrencies have issues.”
The big issue, he says, surrounds know-your-customer (KYC) and anti-money laundering (AML) rules.
“Everyone I talk to in the banking industry, regulators, central banks — everyone sees the potential. But everyone is trying to fundamentally grapple with the issues. I wouldn’t say crypto is bad, but I think crypto needs some evolution,” he said.
Elephant in the Room
Meanwhile, he wasn’t afraid to tackle the elephant in the room, his boss Jamie Dimon’s previous derogatory remarks on bitcoin, offering some perspective.
“I think he’s backed off, clarified a couple of comments. He’s always been super consistent in breaking the two apart cryptocurrencies versus blockchain. In terms of cryptocurrencies, given right now the banking industry is facing these questions, I think his comments were quite relevant to the times. If you talk to many regulators, they possibly have similar feelings,” said Farooq.
But he wouldn’t go so far as to say that JPMorgan has plans to roll out a bitcoin product to retail investors in the near future, saying: “At this point, everyone is studying the stuff.” Once policies are developed reflecting KYC and AML standards, “then the retail bank will take a hard look at how to do this,” he added.
Meanwhile, JPMorgan has been exploring blockchain technology for the past two years when the market was still “nascent,” having developed Quorum, based on Ethereum, which was open-sourced and brought Jamie Morgan to GitHub. He doesn’t view the technology as a threat for now.
Farooq expects blockchain will have a “radical impact” on some of the bank’s businesses, particularly as it relates to providing trust between parties. “There’s always a role for a trusted advisor in the mix,” he said, adding the bank could provide infrastructure or facilitate the data layer. “There will always be a role. It’s not an existential threat in the short-term.”
Blockchain has gripped JPMorgan, as evidenced by a blockchain virtual room for messaging that’s ballooned to more than 1,500 people. He said his team started small and now every line of business at the firm has blockchain representation. They approach the blockchain group saying a problem “smells or feels” like it could use the blockchain for data transfer, reconciliation, etc. Today the blockchain group is engaged with multiple businesses across payments, capital markets and custody.
“Our fundamental approach to blockchain is we think about the customer issue we want to solve … 80% of the time, blockchain isn’t the answer and it ends up being an infrastructure issue. But we focus on the 20% of the time where blockchain really is a good solution. We have a number of solutions on the way,” he said.