Two of the biggest banks in North America are partnering to experiment with blockchain.
The National Bank of Canada, along with JP Morgan Chase, is testing a blockchain platform they will use to issue different financial instruments and streamline origination, settlement, interest rate payments and other processes.
The Canadian bank issued a $150 million USD one-year floating rate Yankee certificate of deposit and mirrored that issuance on a blockchain platform as well. In this case, “Yankee” denotes any certificate of deposit issued by a foreign bank—in this case, Canadian—in the U.S. The test will involve the two banks mirroring execution of the actual transaction through an application built on Quorum, an open-sourced variant of the ethereum blockchain. Quorum was developed by JPMorgan Chase in-house.
Participants who invested in the Yankee certificate that helped spawn the mirrored spinoff blockchain test include Goldman Sachs Asset Management (GSAM) and Pfizer.
“Blockchain-related technologies have the potential to bring about major change in the financial services industry,” said David Furlong, SVP of AI, venture capital and blockchain at National Bank of Canada. “This is a unique opportunity for us to expand our knowledge of blockchain. National Bank of Canada will continue to innovate over the coming years and remain on the lookout for ways we can bring our partners greater value.”
These kinds of tests involve seeing how a blockchain platform would handle a massive investment fund and work with multiple different parties involved. Though it is just research, initiatives like this are organized to see how blockchain can add value and efficiency to these massive banks’ existing platforms.
“This is an exciting example of how J.P. Morgan leveraged our combined capabilities in capital markets and blockchain technology, delivering results to a diverse set of clients,” said Christine Moy, blockchain program lead at J.P. Morgan. “We look forward to exploring blockchain-enabled capital markets applications, how these types of transformative opportunities can benefit our clients and counterparts, and how working together on open source technology like Quorum can enable and accelerate this progress.”
The best kinds of outcomes from tests like these would revolve around added transparency for consumers, streamlined processes, and minimized transaction costs. But banks have to be careful—those optimized transaction fees could result in a lot of lost income.
Banks of all sizes are looking to integrate some form of blockchain technology into their platforms. The Royal Bank of Canada (RBC) has even begun to see how the new technology could impact the credit scoring system. There’s no doubt blockchain will make its way to the big banks eventually, and it’s refreshing to see large-scale tests being run to see what kinds of improvements the tech can bring.