JP Morgan Builds Blockchain-Based Platform for Tokenizing Gold

New York-based investment bank JP Morgan has developed an enterprise version of the Ethereum blockchain for tokenizing gold in an effort to allow sustainable miners to earn a premium on global markets, the Australian Financial Review reported October 29.

According to the report, JP Morgan, one of the largest banks across the globe, has built an Ethereum-based blockchain for tokenizing assets like gold bars, allowing users to use smart contracts.

As explained in the report, while blockchain technology was initially deployed to create Bitcoin, JP Morgan has developed Quorum to manage global liquidity and create digital assets.

As JP Morgan’s head of blockchain initiatives Umar Farooq touted:

We are the only financial player that owns the entire stack, from the application to the protocol. We are big believers in Ethereum.

Designed to provide optimum performance and high-grade privacy to bank clients, Quorum was developed to provide a platform that would allow parties to facilitate direct trading without any intermediaries.

The application of blockchain technology in tokenizing assets was initially discussed during a previously held annual Sibos conference in October. According to Farooq, the tokenization of commodities and other assets provides new opportunities for traders around the world, noting that:

“There are people outside our firm using Quorum to tokenize gold, for instance.”

Explaining the bank’s move to tokenize gold, he went on stating that:

“They wrap a gold bar into a tamper-proof case electronically tagged, and they can track the gold bar from the mine to endpoint – with the use case being, if you know it’s a socially responsible mine, someone will be willing to pay a higher spread on that gold versus if you don’t know where it comes from. Diamonds is another example.”

As it stands, a number of benefits can be yielded from tokenizing commodities, including improving liquidity management as well as providing distributed ownership.

According to Farooq, there is a possibility that Quorum may potentially be spun out of JP Morgan as it is also being considered to be applied in the issuance of capital markets, secondary markets, and custody. In addition, the National Bank of Canada is also using the platform for issuing certificates of deposits to investors in the U.S. and is also currently being trialed by the Monetary Authority of Singapore.