JPMorgan CEO Voices Concerns Over Public Blockchains; Traditional Financial Firms Favor Tokenization
Summary:
JPMorgan's CEO, Umar Farooq, has expressed concerns over the ability of public blockchains to handle large transaction volumes, advocating for platforms like the Unified Ledger for greater accountability. Despite Farooq's concerns, more traditional financial institutions are leaning towards tokenizing assets on public blockchains, inspired by recent initiatives such as BlackRock’s $100 million 'BUIDL' fund.
JPMorgan has expressed concerns about the sufficiency of public blockchains in handling substantial transaction volumes. On May 7, at the BIS Innovation Summit, Umar Farooq, CEO of JPMorgan's Onyx, a blockchain-based payment platform, highlighted the necessity of a platform like the Unified Ledger. He suggested that public blockchain ledgers currently cannot effectively accommodate large transactions. The Unified Ledger concept, proposed by the Bank of International Settlements (BIS) last year, seeks to facilitate tokenized deposits, digital assets, and central bank money flows on its network.
Farooq emphasized uncertainties in transaction accountability that arise when large transactions fail on public blockchains. Farooq questioned who would be held responsible under such scenarios, arguing for a system featuring accountability and trust. Despite Farooq's criticisms, JPMorgan’s Onyx platform, a private, permissioned version of Ethereum, the world's second-biggest public blockchain network, is up and running. The key difference is that Onyx's permissioned chain allows transaction reversals, unlike public blockchains.
Furthermore, Farooq pointed out that cryptocurrencies circulated on public blockchains may generate misleading incentives designed to draw more users towards the networks and increase the coin's value. For Farooq, blockchains need to be viewed more as a public asset than a wealth generation mechanism.
Despite negative feedback, traditional financial companies are increasingly showing an interest in tokenizing assets on public blockchains, according to Celisa Morin, former Vice President of Platform Distribution at Grayscale. She mentioned BlackRock's recent initiative as a potential encouragement for more traditional financial institutions to opt for public blockchain tokenization rather than private ones. Morin was referring to BlackRock's 'BUIDL' fund, a $100 million tokenized fund launched on the Ethereum network on March 18. BlackRock's BUIDL fund now stands as the globe’s biggest tokenization fund, holding more than $382 million as per data from Dune.
Published At
5/8/2024 5:40:49 PM
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