JP Morgan Looks to Crypto’s Future with Optimism
In a recent report entitled “Unlocking Economic Advantage with Blockchain: A guide for asset managers,” JP Morgan makes the case for blockchain’s use in legacy business and asset management, which includes the bank’s take on blockchain’s adoption timeline.
“There is a growing realization that distributed ledger technology — popularly known as blockchain — will bring a radical shift in the way we think about financial assets and the way the financial industry will operate in the future,” the report begins. Co-authored by management consultant Oliver Wyman, the writeup “[argues] that asset managers need to get off the sidelines and take the initiative to understand and embrace blockchain.”
As such, JP Morgan presents “a guide to how the technology may evolve, the impact it may have on asset managers and the action they can take.” The first section of this guide details “Four Anticipated waves of blockchain deployments,” which are:
Information Sharing (2016-2019): In this stage, blockchain technology is used to store and share data, either within a single organization or between multiple organizations. Blockchain will be tested in current working environments for proof of concept and feasibility of use cases.
Data Solutions (2017-2025): At this second phase, JP Morgan sees blockchain being integrated into business solutions to foster an environment for storing and managing data. This integration will allow entities to reduce operational friction and improve existing infrastructure. When user interest and confidence is high enough, blockchain platforms will move from working alongside existing infrastructure to replacing it entirely.
Critical Infrastructure (2020-2030): Now, blockchain adoption is at full throttle. At this point, it will be “adopted by market participants as [the] main infrastructure for critical functions.” This could include replacing the outdated asset, payment, and/or transaction infrastructure and setting a new business standard for efficient data management. Certain iterations of the technology will still be centralized at this point, though, for the convenience of access rights, deployment, standards, etc.
Full Decentralized (no date forecasted): The era of a truly decentralized economy. Blockchain would replace certain centralized models, infrastructure, and systems with a decentralized solution. This means completely peer-to-peer digital asset exchange and a legal framework for overseeing asset ownership and transfer using blockchain technology. In essence, blockchain and cryptocurrencies become so ingrained in daily life that they become as normal as the internet or smartphones today.
The report continues to discuss the benefits blockchain offers to asset managers, including frictionless data management and solutions. JP Morgan sees cost advantages, as well, wherein cutting out unnecessary processes and more efficient data aggregations mean lower costs for managers. In the near future, the firm sees operations, IT, portfolio management, and finance sectors reaping the rewards of blockchain the most.
Additionally, revenue potential will increase for managers and businesses with access to improved data sources and liquidity mechanisms.
Towards the end of the report, JP Morgan implores managers “on the sidelines” to get off the bench and get into the game, claiming that those who will benefit most from this disruptive technology are those who get in early and work towards solutions.
Its authors also devise a “playbook” for chief officers of companies looking to work with blockchain, stressing the deliberation on the following:
- Assessment of and education on the potential of blockchain in your organization
- Guidelines for your organization’s vision and ambition going forward
- Blockchain’s position on your leadership team’s list of priorities
- An environment that fosters transformative approaches and innovative thinking within your tech teams
- An external adoption/engagement approach
Back in February, JP Morgan said that cryptocurrencies could one day be integral to a diverse and well-balanced financial portfolio. Last week, the bank publicly announced that cryptocurrencies pose a threat to its financial model.
Now, the institution is fully vetting the potential of blockchain to asset managers and business entities alike, a sea-change of sentiment from an organization whose CEO called crypto a “fraud” last year. Recently, Jamie Diamon retracted this statement, and complementing his remorse, he endorsed blockchain technology for its wealth of potential.
This report serves physical testament to the increased interest in blockchain and cryptocurrencies we’ve seen over the past year. Coming from one of the largest and most respected financial institutions in the world, the endorsement should further legitimize crypto to its skeptics. As the arch of adoption continues forward and up, official reports like these, whether from the private or public sector, will be crucial for educating the public and dispelling misinformation and myths about blockchain and its abundant potential.
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