Crypto settlement plays like Ripple be warned — banking goliath JP Morgan is aiming to launch new settlement functionalities on its interbank blockchain rail, the Interbank Information Network (IIN), in the third quarter of 2019.
The advancement was confirmed by the firm’s head of global clearing, John Hunter, who told the Financial Times per an April 21st report that the IIN’s settlement pivot was meant to address antiquated bank processing flows.
As much as 20 percent of contemporary bank payments stall because of minor compliance errors, he noted. Resolving these errors often entails a long, winding process as multiple institutions have to manually coordinate on resolutions.
The IIN’s new settlement functionalities will be aimed at giving participant banks — of which there are more than 200 to date — the ability to considerably reduce the time necessary for such resolutions by offering real-time validation that transaction details are correct.
The IIN is built on Quorum, a private or permissioned version of the Ethereum blockchain that’s been developed by JP Morgan since 2016.
In recent years, private blockchain skeptics have openly challenged the viability of permissioned blockchains when compared to the alternative of using regular databases or public blockchains privately. Yet Hunter’s new revelations show JP Morgan has done much more than just make their mind up in that debate — and their IIN vision has already won a couple hundred takers to the firm’s side to boot.
The development also marks the intensification of competition for cryptoverse-native payments settlements plays like Ripple and Stellar, which are respectively gunning to make their own enterprise leaps toward the mainstream.
A Coin and an Interbank, Oh My
The ramping up of the IIN’s settlement possibilities comes after JP Morgan announced back in February it would be releasing a stablecoin-like token, the JPM Coin, via Quorum.
The firm declared the token would be pegged to the U.S. dollar and would be unfurled in preliminary payment settlement trials in 2019.
JP Morgan isn’t aiming small with the token, either. The bank’s blockchain lead Umar Farooq noted at the time of JPM Coin’s announcement that the eventual reach of the project was, in effect, wide open.
“Pretty much every big corporation is our client, and most of the major banks in the world are too,” Farooq said.
On the flip side, analysts qualified the announcement in saying JPM Coin wouldn’t be a cryptocurrency per se because its source was the permissioned Quorum — not to mention that cash deposits must be made to JP Morgan to an receive an associated number of coins.
Even still, in JPM Coin and in the IIN, JP Morgan is inviting other major enterprises to dip their toes into blockchain tech in high-level ways. The firm is reportedly planning to let companies experiment with building apps on the IIN later this year.
For now, there’s no word on how, or if, the token and the interbank will be used in tandem, though that dynamic seems highly likely.
Moreover, it’s also worth mentioning that JP Morgan is a stakeholder in the public blockchain ecosystem. This month, the firm joined the Token Taxonomy Initiative, which is seeking to standardize tokenization practices to facilitate enterprise adoption of crypto.
JP Morgan has also been engaging with tech that has been designed to conceal transactions details on the Ethereum network, suggesting the banking powerhouse doesn’t intend to wholly sequester activity on the private Quorum platform from Ethereum.
That’s because the firm has been testing the zero-knowledge proofs (ZKPs) of the London-based AZTEC team. Another possibility the bank could look at is Nightfall — a new privacy protocol for the public Ethereum network that’s been developed and released into the public domain by “Big Four” accounting giant EY.