Nov 1, 2018 16:31
JPMorgan’s Blockchain Platform Quorum Used to Tokenize Commodity Assets
JPMorgan’s Quorum is being used to tokenize various real-world assets, including gold. The platform is poised to become an important instrument for companies looking for blockchain solutions.
Quorum, the blockchain platform developed by US-based banking giant JPMorgan, is used to tokenize gold bars, according to
the Australian Financial Review (AFR), citing an executive that was present at the Sibos conference in Sydney. Quorum is the enterprise version of Ethereum, the popular blockchain network that supports smart contracts. Quorum is currently applied to digitize gold bars and move them on blockchain, which will permit sustainable miners to generate a premium on the gold markets.
Speaking about Quorum, Umar Farooq, head of blockchain initiative at JPMorgan’s New York branch, reportedly said:
"We are the only financial player that owns the entire stack, from the application to the protocol."
“We are big believers in Ethereum,” he added."
While Ethereum is a decentralized, open-source blockchain network, Quorum has been adjusted to offer a high level of privacy, as it represents a permissioned blockchain.
In the last few months, the distributed ledger technology (DLT) is being used increasingly to tokenize real-world assets such as company shares, real estate, and commodities, including gold. The end result is the production of security tokens, which ensure higher liquidity and enable investors to trade the assets more conveniently and in a more secure environment.
The topic of tokenization was in the spotlight during the Sibos conference held in Sydney, Australia. Sibos is an annual event organized by SWIFT. It focuses on financial services and consists of the conference and exhibition. Umar Farooq was also present at the event last week, though not as a speaker.
He told the AFR that tokenization of commodities might develop new opportunities for global investors and traders in the medium term.
“There are people outside our firm using Quorum to tokenize gold, for instance,” Farooq revealed.
“They wrap a gold bar into a tamper-proof case 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,” he explained.
Also, the tokenization of property assets or art might be used to fractionalize ownership, which makes it easier for expensive items to be owned collectively by more investors. For example, earlier this month, we reported
that Propellr and Fluidity were tokenizing a $30 million building in New York. The property is now fractionalized and moved on Ethereum.
Once the assets are tokenized, they can be traded including through “atomic swaps,” an operation that allows two or more parties to exchange the tokens via smart contracts, which is done without any middlemen.
Craig Mc Gregor, co-founder and CEO of security token exchange operator DSTOQ, told us
in an earlier interview that:
“Security tokens are the natural evolution of not only financial markets but also the cryptocurrency market. Security tokens are an extension of an existing asset class that offers a variety of features and holds intrinsic value, whereas utility tokens can only be used within the ecosystem of the specific project it is associated with. Both types of tokens have their use cases, but it is becoming increasingly clear that demand is increasing for security tokens as a new financial instrument.”
Quorum, which might become independent from JPMorgan, is being actively used for capital markets issuance, custody, and secondary markets.
JP Morgan has created the Interbank Information Network, comprising more than 100 banks, which is using its blockchain to enhance payments information. Elsewhere, the platform was also used
by the National Bank of Canada for debt issuance. The project additionally involved JPMorgan, Goldman Sachs Asset Manager, and Pfizer among others.