Friday, September 28, 2018

Did JP Morgan just create the future alternative to SWIFT for cross-border payments through the Blockchain

While alternative economists over the past year have mulled over whether the Fed Coin cryptocurrency is being created as a replacement for the dollar, JP Morgan on Sept. 27 may have quietly built the future replacement for the SWIFT system in a blockchain platform meant to allow cross-border payments between banks and other financial services.

JP Morgan’s initiative is to remake the cross-border payments business using an Ethereum-based blockchain system called Quorum. Sending dollars from a corporate account in the US to Europe or Asia may sound easy, but in reality anti-money laundering and know-your-customer regulations are complex and everything has to be done just so. At our prior company, partly owned by another very large multinational bank, we had to sit through hours of compliance training on such topics. It’s no joke… 
Payments such as these are exactly where you would expect to see big financial institutions like JP Morgan cede ground to new blockchain-enabled startups with a cost advantage over large commercial banks. “Blockchain” is the technology that powers bitcoin and other crypto currencies. It offers a secure way to validate transactions and is much cheaper to run than a centralized, company-specific system. And payments are a low margin business for most banks, offered primarily to keep corporate Treasury customers happy so they will buy other more lucrative services. New technology meets low-profit business line = classic disruption story. 
Other banks must see the same threat, because yesterday the Financial Times reported that JP Morgan has signed up more than 75 of the world’s largest banks to its new Interbank Information Network, powered by the Quorum blockchain. Two banks – RBC and ANZ – had been testing IIN since October of last year along with JPM. All this makes the IIN/Quorum the single largest real-world application of blockchain technology out there, according to JPM. - Data Trek
Both central banks and sovereign nations have come to the realization that the dollar's days as the unipolar reserve currency are quickly coming to an end, and many of these institutions are working hard to create their own SWIFT system replacements and blockchain based currency or payment platforms.  And since JP Morgan is a shareholder of the Federal Reserve, it is not out of the realm of possibilities that should their new Blockchain platform work well in bank to bank cross-border payments, it could then be very quickly integrated to replace SWIFT in performing this function between nations, their currencies, and global trade payments.


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