Goldman and JP Morgan Embracing Blockchain Technology

Published on: August 24, 2022
Author: Philip Tai

Early this week, Tom Farley, former President of the New York Stock Exchange was quoted in the Wall Street Journal as saying “Blockchain technology is going to rewire all financial services.”  While the drop in cryptocurrency prices may have tarnished the blockchain concept in recent months, it’s hard to argue with Farley as bluechip banks and corporations have begun to make blockchain part of its key infrastructure.

Goldman and JP Morgan has started using Blockchain Technology

Wall Street’s biggest banks have, for the most part, shunned directly investing in cryptocurrencies. Many are, however, working to integrate blockchain in its trading and other businesses.

Specifically, JPMorgan Chase & Co. already has a platform in place, called Onyx. Goldman Sachs Group Inc. is also trading some bonds and other debt securities for clients on blockchain-based networks such as Ethereum, and the bank is building its own blockchain-based trading platform.

Typically, big wall street banks still have their sophisticated trades run on creaky old legacy systems. Goldman and others hope they will be able to run faster, less-costly and ultimately more-profitable systems based on blockchains.

The blockchain, also called distributed ledger technology, is the system that keeps crypto markets running. It is essentially a software program that uses an open record-keeping system—a central ledger—to track assets and record transactions and information about ownership of those assets. Every participant operates off the same central ledger.

How is Blockchain used in the Finance Industry?

A simple explanation of blockchain is that it’s a decentralized ledger that records transactions. For the financial industry, this technology is attractive since it allows for more efficient transactions, automated contracts, and greater security.

Some of the expected benefits of adopting blockchain in the finance industry include:

Authenticity and scarcity: Digitization ensures data integrity, and enables asset provenance and full transaction history in a single shared source of truth

Programmable capabilities: Code that addresses governance, compliance, data privacy, identity (KYC/AML attributes), system incentives and features that manage stakeholder participation (for voting and other rights)— can be built into the assets themselves

Streamlined processes: Heightened automation increases overall operational efficiency. It enables real-time settlement, audit and reporting; and it reduces processing times, the potential for error and delay, and the number of steps and intermediaries required to achieve the same levels of confidence in traditional processes

Economic benefits: Automated, more efficient processes trigger reduced infrastructure costs, operation costs, and transaction costs

Market reactivity: Digital securities allow greater customization than standardized securities, and can be issued within shorter timeframes. Issuers can create bespoke digital financial instruments directly matched to  investor demand.

New products and markets: Secure, scalable and rapid asset transfers, fractionalized ownership of real-world assets, tokenized micro-economies, and more

Interestingly for banks like Goldman or JP Morgan, these benefits result in more transparent governance systems, greater business efficiency, greater liquidity, lower costs of capital, and, most importantly, broader access to investors and capital.

Meet the Canadian Company that is Building Blockchain Infrastructure for Major Market Players

Blockchain Foundry Inc. (CSE:BCFN), is the leading North American blockchain development firm that has been at the forefront of linking the nascent blockchain industry to major players in the finance industry.

Read about BCFN’s most recent business update here:

Disclaimer: NAI is being compensated for this content. Materials contained in this content are for information purposes only and is not intended to constitute an offering of securities in any jurisdiction. Nothing on this content should be construed as an offer, solicitation or recommendation to buy or sell products or securities.

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