Saturday, May 19, 2018

JPMorgan Chase Tests Blockchain Use for Securities Services

Prototype to consider benefits of shared ledgers, as well as challenges

On May 16, 2018, JPMorgan Chase unveiled Dromaius, its prototype of a shared ledger for capital market services, at Coindesk’s Consensus 2018 conference. The prototype is designed to test the use of the Ethereum blockchain technology in supporting a coordinated posting by multiple entities to a single encrypted securities bookkeeping system. JPMC executive director Christine Moy said that, “We think the technology has the potential to be transformative.”

Ms. Moy, who leads J.P. Morgan’s Blockchain Center of Excellence, told the Wall Street Journal that the technology “should streamline operations, help with cost savings and overall make the experience of transacting or issuing a financial instrument like this more seamless and simplified.”

Among the challenges in scaling the prototype are said to be the development of a set of standards for the blockchain protocol, real-time integration with legacy systems, and the adaption of existing operational processes to maintain security of the shared ledger. To work out the details of stakeholder access, especially on a cross-border basis, the bank will be working with its colleagues in a consortium of like-minded companies.  

In addition to JPMorgan Chase, the nonprofit Enterprise Ethereum Alliance includes the Depository Trust and Clearing Corporation, Bank of New York Mellon, Banco Santander, Itau Unibanco, ING Bank, Royal Bank of Scotland, John Hancock Life Insurance Co., National Bank of Canada, among other financial firms, as well as tech companies such as Intel, Microsoft, Hewlett Packard, VMware and Accenture.

While the technology is still in its early stages, according to the JPMorgan Chase press release, progress has been made “in identifying not only the technical challenges of integrating the new technology with legacy systems, but also the risk and operational factors to deploy the blockchain-based platform. By harnessing the properties of blockchain, Dromaius demonstrates J.P. Morgan’s commitment in progressing advanced technology into real financial market applications.”