With a New York HQ and total assets valued at $2.534 trillion, JPMorgan is easily the world’s most valuable bank by market capitalisation. Now it has just announced that it will be using Quorum to “tokenise” gold bars.
What is Quorum?
Quorum is the enterprise version of the Ethereum blockchain, developed by JPMorgan Chase, will ensure users operate smart contracts while using pre-programmed rules to automate them. In a Financial Review report, the development was described as “an indication of new trading opportunities the disruptive technology will create over the coming decade.” Furthermore, the Financial Review quoted Umar Farooq, JPMorgan Chase’s head of blockchain initiatives, who stated: “We are the only financial player that owns the entire stack, from the application to the protocol.”
Quorum seeks to tokenise assets by using blockchain technology to efficiently digitise them so they can move on distributed ledgers. The development will help remove the need for intermediaries, such as an exchange or broker. It should also provide the means for direct transactions among parties and thus reduce costs and risks.
What will it mean for gold miners?
JP Morgan’s Farooq said that in the medium term tokenisation of commodities could create new opportunities for sustainable gold miners. He pointed out that there are others apart from his bank that are using tokenisation for gold and explained the process: “They wrap a gold bar into a tamper-proof case that is electronically tagged, and they can track the gold bar from the mine to end point — 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.”
The Financial Review also suggested, “Tokenisation can improve global liquidity management by allowing the netting out between corporate subsidiaries without having to move actual money” and atomic swaps are also likely to feature in future developments.