Daily Management Review

JPMorgan: Transition to e-money will be based on blockchain


The blockchain technology may become the basis for the transition to digital money, JPMorgan Bank believes. In the bank’s opinion, blockchain will allow transactions to be carried out almost in real time, but it is still at the initial stage in the financial market.

Emergence of blockchain, on the basis of which cryptocurrencies operate, as well as changing consumer preferences, have turned modernization of payments into a global topic, JPMorgan writes in its report on technology. According to JPMorgan, blockchain could become foundation for development of digital currencies and fast payments.

In 2019, the rise in electronic money became apparent, the bank said. Its analysts write that blockchain is widely used now: for example, part of the shares on stock markets are already being sold with its help. In addition, companies and governments are developing their own electronic means of payment and currencies, the bank writes: JPMorgan itself launched its cryptocurrency JPM Coin last year, and China is busy creating a digital renminbi. Sweden is also developing an electronic krona, Bloomberg wrote on February 20.

JPMorgan notes that difficulties remain with the introduction of technology. The main limitations are computing power and slow internet connection. In addition, financial regulators around the world have not yet formed a position on the new digital assets, the bank notes. Back in 2019, the most notable project was the Libra cryptocurrency from Facebook, but it was faced with harsh criticism from the U.S. Congress and European authorities. “The failed release of Facebook’s Libra serves as a reminder that the rapid implementation runs into practical difficulties when expanding,” said JPMorgan.

Blockchain is a promising technology for banks and large corporations, but they need to figure out how to use it, Bloomberg points out. The combination of several users and companies in one network will make it possible to make transactions in almost real time, but so far most of the efforts of companies are in the early stages of development or testing, the agency comments. JPMorgan believes that the most obvious areas for applying the technology are payments, financial trading and depository banks.

In addition, JPMorgan warned investors against investing in bitcoin and other cryptocurrencies. According to the bank, they still play a very limited role in world markets and as a hedging tool (measures for insurance of risks in the financial market). Cryptocurrencies can only be stored in case of a simultaneous loss of confidence in a country's currency and the payment system, said JPMorgan. 

source: wsj.com, bloomberg.com