JPMorgan Chase is working on a potential spin-off of its main blockchain technology project after the biggest US bank by assets decided it was more likely to achieve widespread adoption as an independent operation.
The US bank developed Quorum as its own customised version of blockchain technology over two years ago, in an effort to make many of its operations more efficient, such as clearing and settlement of derivatives and cross-border payments.
The expected spin-off of Quorum underlines how banks have struggled to find the best way of harnessing blockchain technology, which uses a distributed ledger system to share information across a network of computers that is protected by cryptography.
The change in approach by JPMorgan is particularly sensitive because its chief executive Jamie Dimon has been one of the most outspoken critics of bitcoin, the cryptocurrency that is based on blockchain technology.
JPMorgan’s goal for Quorum was “to become the standard of Wall Street,” said one prominent figure within the blockchain industry. But the lack of traction outside the bank may have forced its hand. “Blockchains only work if there are network effects; it doesn’t make sense if banks are using it internally.”
People familiar with the situation said rival banks may have been reluctant to use Quorum because it was so closely associated with JPMorgan, leading the US bank to conclude that its chances of becoming the industry standard were greater as a stand-alone entity.
JPMorgan said in an emailed statement: “We continue to believe distributed ledger technology will play a transformative role in business which is why we are actively building multiple blockchain solutions.”
“We’re not going to comment on speculation, but Quorum has become an extremely successful enterprise platform even beyond financial services and we’re excited about its potential.”
Source: FT.com
