JP Morgan has become the latest firm to invest in Bitcoin technology blockchain, through a collaboration with start-up Digital Asset Holdings (DAH). The bank has announced plans to trial the technology on its loan funds in an effort to improve liquidity for international clients, and will also seek out other applications within its investment banking business. DAH is led by Blythe Masters, who was formerly head of commodities at JP Morgan. Masters led an initial fundraising round for DAH last year which raised more than $50m from investors including JP Morgan, as well as Citigroup, Deutsche Börse and the Depository Trust & Clearing Corporation. According to the Financial Times, JP Morgan will use blockchain to allow investors take out their money at short notice, even though the underlying assets might require much more time to sell. “To sell a loan is a very cumbersome, time-consuming process; settlement can take weeks,” said Daniel Pinto, head of JP Morgan’s investment bank. He added that using blockchain technology “makes all the sense in the world; it’s easier and faster operationally, and you get fewer mistakes”. Blockchain is best known as the technology behind Bitcoin. It is essentially a digital database which stores data in “blocks”, with a new block being added every time the system is updated. Each block is stored in chronological order, and holds a complete cache of information on transactions from the moment they occur. These blocks of data make it easier to maintain transparency even during complex transactions, making it a natural fit for the financial industry. The cloud-based technology also allows users to access funds from any device, anywhere in the world, while transactions can be updated instantaneously in multiple locations.
Blythe Masters has entered into a collaboration with Digital Asset Holdings, the blockchain start-up led by ex-Blythe Masters executive JP Morgan, through which the bank aims to trial the technology on its loan funds in an effort to improve liquidity for international clients. Specifically, the bank wants to investigate how blockchain can enable it to deal better with liquidity mismatches that occur when clients withdraw funds at short notice, as well as exploring other uses for the technology within its investment banking business.