JPMorgan Chase, the largest bank in the United States, has been testing blockchain applications for some time already. In the beginning of the month it partnered with Digital Asset Holdings and started a trial blockchain project aimed at adoption of the technology to the banking industry.
The companies were working on several applications for the technology, including addressing liquidity mismatches in JPMorgan’s loan funds, which normally let investors take out their money at short notice — even though the underlying assets can require much more time to sell.
Daniel Pinto, head of JPMorgan’s investment bank, commented: “To sell a loan is a very cumbersome, time-consuming process; settlement can take weeks. Exploring alternatives through blockchain makes all the sense in the world; it’s easier and faster operationally, and you get fewer mistakes”. He also pointed out that loans were a good place to start trialing blockchain technology, because “the settlement process is complex with lots of manual intervention and multiple parties.”
JP Morgan Chase has just confirmed that it attracted 2,200 clients in the UK and Japan to make transactional testing as a part of its blockchain program. According to Pinto, blockchain technology has allowed to lower risks and increase efficiency due to faster transactional times.
The testing will be revealed to JPMorgan investors during today’s annual presentation by executives including Chairman and CEO Jamie Dimon. If successful, blockchain technology will be used by JPMorgan for live transactions later in 2016.
JP Morgan Chase doesn’t only develop independent blockchain projects, but also invest in the companies working with the technology. It has become one of the chief investors of Digital Asset Holdings that has managed to raise $50 million. Mr. Viswanathan, chief administrative officer from JP Morgan, said: “We are proud to be a lead investor in this round of financing. Distributed Ledger Technology has the potential to transform the way our industry does business, and we believe Digital Asset has the right talent and technology to make it a reality.”
This year, JPMorgan shares are down 11%, which shows that the bank intends to cut costs by shelving staff and shrinking assets in a diminishing market of profit margins. It saves on existing legacy technologies and reduces a number of real estate locations housing technology employees.
Despite the policy of economy, JPMorgan will increase cybersecurity spending by up to 20% and will devote more funds in technology investment and partnerships. This year, the bank has plans to increase its overall technology spend to around $9.4 billion, which is about $200 million more comparing with the last year. 40% of that budget will go directly to new technology costs, up from 30% currently, according to JPMorgan COO Matt James.