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JP Morgan Looking to Merge its Blockchain Unit Quorum with ConsenSys

JP Morgan Chase & Co has been reportedly in talks with blockchain startup ConsenSys, to merge the former’s blockchain unit, Quorum with the startup.

JP Morgan’s Quorum blockchain has been built on the Ethereum network and is used by JP Morgan to run a payments network that involves more than 300 banks, the Interbank Information Network.

JP Morgan is the largest bank in the US by assets and has 25 people currently working in the Quorum team globally. Sources close to the issue said the detail is to be formally announced within the next six months, however, the financial terms remain unclear. Last year, JP Morgan announced its plan to issue a digital currency called the JP Morgan Coin, to enableinstant payments using blockchain, and became the first US bank to create and successfully test a digital coin representing fiat currency. JPM Coin’s primary purpose is similar to a “stablecoin” but used on a business-to-business (B2B) basis rather than a peer-to-peer basis.

Sources also said JP Morgan has been looking into spinning off Quorum for two years, investigating options such as setting up an open-source foundation, creating a startup, or merging with another company. The merger with ConsenSys was decided as the “best path forward” as both organizations are familiar and work with Ethereum and have had joint initiatives in the past.

ConsenSys, on the other hand, has been founded by one of the co-founders of Ethereum, Joseph Lubin. Known for its decentralized working structure, the company recently announced that it had laid off 14% of its staff, due to restructuring reasons. With its restructuring, the company aims to separate its software development business apart from its venture activities; a merger with Quorum hints that the company would align with the aim of growing its software division.

Image via Shutterstock

Crypto & the FATF Travel Rule: FinCEN Suggests Challenges in Governance, Not Technology

The Financial Action Task Force (FATF) Travel Rule has been in the center of attention lately, which concerns crypto transactions above a certain amount must be accompanied by identifying information.

The rule is an update to the existing FATF Recommendation 16, regarding cross-border and domestic wire transfers, and is intended to address the anti-money laundering (AML) and counter-terrorist financing (CFT) challenges as crypto adoption increases. The FATF Travel Rule could mean implications for virtual asset service providers (VASPs), including cryptocurrency exchanges, wallet providers, and custodians.

Financial institutions in the FATF member states are recommended to implement the new regulations by June 2020, a year after it was adopted by the FATF in June 2019.

The FATF has started observing digital assets in 2014, and defining certain terms has always been a challenge for the task force. As Amy Davine Kim, the Chief Policy Officer at the Chamber of Digital Commerce explained at Consensus: Distributed explained, there are still ongoing concerns regarding cybersecurity and privacy concerns over the travel rule.

Since the COVID-19 pandemic emerged, the Financial Crimes Enforcement Network (FinCEN) has published advisories on March 16 and April 3, to warn financial institutions to stay alert for malicious fraudulent transactions, and AML operations during the COVID-19 pandemic. This was due to the increase in these types of cases, as bad actors have leveraged the pandemic for theft and money laundering activities.

The FinCEN has taken a technology-neutral approach so far, as the network has seen the most challenges relating to governance and processes, rather than technology.

Kenneth Blanco, Director of the FinCEN stated, “the FinCEN also plans to publish multiple advisories highlighting common typologies used in pervasive fraud, theft, and money laundering activities related to the pandemic to better help the financial sector to better protect, and report this activity.”

Blanco also added that the FinCEN has observed that cybercriminals predominantly launder their proceeds and purchase the tools to conduct malicious activities via virtual currency. He said, “During this time of crisis where our people are more at risk or more vulnerable than ever, we, all of us, have a duty and responsibility to use our abilities, tools, and talents to protect others and ensure the stability of this ecosystem that we are creating and it depends on trust.”

Blanco concluded,

“We encourage the virtual currency sector to continue collaborative efforts to develop and implement these solutions and to keep FinCEN apprised their progress, including to participate in FinCEN’s innovation hours program.”

Coinbase recently revealed that the company has become a banking client of JP Morgan’s, impacting the future outlook of cryptocurrency exchanges and banking relationships.

Regarding the news, Jeff Horowitz, the Chief Compliance Officer at Coinbase said the company is focusing on analytics and transaction monitoring systems as banks will want to see these features in the crypto ecosystem. While he is pleased to see JP Morgan and other banks getting into the space, he said he hopes to see solutions for lower barriers to entry, as well as the solutions to comply with the travel rule do not come from a money-making perspective.

He further suggested that a “regulated” VASP has not been defined globally, and the industry must work to decide a framework regionally, then work on going global.

Adam White, Chief Operating Officer at Bakkt said, “We’re going to see a bifurcation in the crypto space, we’re going to see white crypto, and we’re going to see grey crypto, and the different forms of crypto will most likely trade for different prices. Offshore unregulated exchanges that aren’t complying with the travel rule, their assets will be traded at different prices.”

MAS Announces Project Ubin’s Successful International Settlement Network in its Final Phase Report

The Monetary Authority of Singapore (MAS) and government-owned conglomerate Temasek released the final report of the Singaporean CBDC project, Project Ubin. The report is the fifth and final phase of Project Ubin, Singapore’s blockchain-based multi-currency payments network prototype that was built for the financial industry and blockchain ecosystem.

Singapore’s central bank introduced Project Ubin in November 2016, along with its partnership with R3, to build a proof-of-concept project to conduct inter-bank payments using blockchain.

The goal of the project was to understand what kind of potential benefits blockchain technology can bring, and the MAS had a goal of developing simple-to-use alternatives to current systems based on central bank-issued digital tokens.

The project has since taken a multi-phase approach; where the first two phases focused on building technology capabilities for domestic payments network, the next two on the interoperability of blockchain-based networks for delivery-versus-payment, and cross-border payment-versus-payment.

The blockchain-based network developed during Phase 5 of Project Ubin successfully settled payments in different currencies on the same network. This international settlement network could enable faster and cheaper transactions than conventional cross-border payments channels. Chief FinTech Officer of the MAS said:

“As with all innovation adoption, there is a time for experimentation, and a time for commercialisation. Project Ubin has worked with the financial industry and blockchain community on a journey of experimentation, prototyping and learning. This has built a strong foundation of knowledge, expertise and experience, and paved a path towards commercial adoption. Following the successful experimentation over five phases, we look forward to greater adoption and live deployment of blockchain technology.”

JP Morgan’s Quorum and JPM Coin for the Ubin V payments network

JP Morgan led the technical development workstream, leveraging its enterprise-grade blockchain Quorum platform, and its JPM Coin to develop a production-ready payments network.

The Quorum platform was used for the production-grade capabilities developed as part of the Interbank Information Network (IIN), while the JPM Coin will be leveraged to develop a production-ready payments network. Quorum was developed as a fork of the Ethereum blockchain and was made open-source by JP Morgan, and has extensions including transaction and contract privacy, higher performance and settlement finality over the public Ethereum network.

Accenture led the use of case development workstream, which merged with JP Morgan’s technical development workstream for connectivity and integration testing. Accenture identified 124 projects with use cases that could benefit from using the Ubin payments network, with the support from the MAS and Temasek.

Project Ubin has a view of that the future world would require different ecosystems to be linked together by multiple blockchain networks, to provide different services, operating on different platforms and technical infrastructures.

The Ubin V network was built with an emphasis on open architecture, open connectivity, and interoperability for the ease of integration across different networks for seamless end-to-end transaction processing.

The Ubin payments network consists of five components — ledger interoperability service, gateway communication service, blockchain ledger, user connectivity interfaces, and digital currency.

Technical Architecture Design. Source: Project Ubin Phase 5, MAS

The future of the Ubin network

Although the project focused initially on the financial services industry, Project Ubin also explored the benefits for use cases for providing services in exchange for value, including media and advertising.

Salary payments were also looked at as a potential use case, as it is expected that the global gig economy will grow 17 percent annually to 2023, Singapore with the greatest growth in the Asia-Pacific region, according to the report.

After phases of research and experimentation, Project Ubin concluded that the industry will gear up towards commercialization and live projects. The report added:

“With a clearer understanding of the benefits and the business value, there will be further commercial adoption and live implementation of the technology for viable use cases.”

Image source: Duy Nguyen via Unsplash

Leaked FinCEN Files: $137M Linked to Crypto Ponzi Scam OneCoin Laundered Through Bank of New York Mellon

A leaked trove of US official documents revealed that five major banks – Deutsche Bank, HSBC, JP Morgan, Bank of New York Mellon, and Standard Chartered Bank – were involved in illicit transactions pertaining to mobsters, crypto Ponzi schemes, and money laundering.

The official Financial Crimes Enforcement Network (FinCEN) document was leaked and disclosed that more than two trillion USD had been laundered and flagged as suspicious by financial institutions following the Anti-Money Laundering (AML) act. However, the dirty money was still reported to have been freely flowing through renowned US banking institutions.

BNY Mellon wired millions linked to OneCoin

Among them, one of America’s oldest banks, the Bank of New York Mellon (BNY Mellon) was reported to have wired funds linked to the infamous crypto laundering Ponzi scheme OneCoin.

The banking institution flagged a series of transactions from their branch to FinCEN, as the transactions were deemed suspicious and layered. Layering refers to a money laundering ruse through which the source of funds is concealed through multiple transactions. It is often used by mobsters and criminals to remain undetected by the Financial Crimes Enforcement Network and other financial regulators.

$137 million in transactions wired through BNY Mellon

The funds pinpointed by BNY Mellon were linked to OneCoin, a crypto scam that made the headlines and was classified as a Ponzi scheme generating multimillion funds by US law enforcement agents. The crypto Ponzi scheme was masterminded by Ruja Ignatova, who disappeared to flee arrest.

OneCoin was operational in many countries, such as New Zealand and the US, to name a few, and generated at least $4 billion through cryptocurrency “pyramid schemes,” making it one of the most successful and biggest Ponzi scheme in cryptocurrency history.

According to the leaked report, a combined $137 million was wired thanks to numerous transactions operating through the Bank of New York Mellon. The source of the transactions was reported by the bank to originate from OneCoin perpetrators and agents.

Other banks that were named in the leaked FinCen files include Deutsche Bank, JP Morgan, Standard Chartered Bank, and HSBC.

Deutsche Bank

The Deutsche Bank is alleged to have played a role in moving money worth more than $560 million for a Latin American construction company. It is alleged by US prosecutors to have been subject to foreign bribery. FinCEN has recorded a combined total of $1.3 trillion of suspicious transactions flowing through Deutsche Bank, making it the lead bank of the pack for having the largest suspicious transaction volume.

JP Morgan

JP Morgan was said to have processed at least $514 billion of suspicious transactions. It was said to have been involved in a money-laundering operation involving former Trump campaign manager Paul Manafort, and Bernie Madoff. It is also alleged to have conducted business with a financial Malaysian fugitive and a Venezuelan criminal.

Standard Chartered Bank and HSBC

Standard Chartered Bank was said to have processed illicit transactions amounting to a combined $24 million for foreign mobsters.

Finally, HSBC is alleged to have been in cahoots with Russian mobsters, moving funds amounting to at least $4.5 billion in suspicious transactions. The bank is alleged to have continued its money laundering transactions and to have wired funds linked to a Ponzi Scheme. An HSBC Hong Kong executive has been accused of processing more than $900 million in transactions linked to criminal networks.

Statements from Deutsche Bank and other financial banks have said that the incidents that have come to light in the documents have already been investigated and resolved with Deutsche Bank’s complete cooperation.

JP Morgan CEO Jamie Dimon Calls Bitcoin ‘Worthless’

Jamie Dimon, the chairman and CEO of JP Morgan bank, has once again stated that he is still not interested in Bitcoin as an investment.

During an Institute of International Finance event on Monday, October 11, Dimon stated that governments will come to regulate crypto assets and he personally thinks that Bitcoin is worthless.

“No matter what anyone thinks about it, the government is going to regulate it. They are going to regulate it for (anti-money laundering) purposes, for (Bank Secrecy Act) purposes, for tax,” Dimon stated during the event.

Although he thinks that Bitcoin will continue existing for the long term, he always believes that the cryptocurrency would be made illegal in some places, like China made it illegal so he thinks that the asset is a bit of fool’s gold.

Dimon, a prominent leader of the largest US bank, has been critical of the cryptocurrency, once calling it a fraud and later stating that he regretted uttering such a statement.

In May, Dimon reiterated his stance on Bitcoin, stating that the crypto is not supported by an asset and therefore has “no intrinsic value”.

While in June, JPMorgan bank started providing its wealth management clients access to crypto funds, Dimon stated that his views are different from those of the bank and its board. He said that:

“I personally think that Bitcoin is worthless.”

He further added that: “I don’t think you should smoke cigarettes either.”

“Our clients are adults. They disagree. If they want to have access to buy or sell bitcoin – we can’t custody it – but we can give them legitimate, as clean as possible access,” Dimon mentioned.

Though Dimon’s personal views on the flagship cryptocurrency have not changed much, it appears that there is a significant change in his tone about the crypto. He stated that his opinion does not imply that JPMorgan clients don’t want exposure to Bitcoin.

New Regulations Likely

Dimon’s statement about cryptocurrency regulation may be right. Recently the US government has increased its focus on regulating crypto markets.

On Friday, October 8, Reuters reported the Biden administration to be weighing an executive order that would instruct federal agencies to study and provide recommendations on the cryptocurrency market.

Although increased regulation may occur, at the beginning of this month, Federal Reserve chairman Jerome Powell and SEC chairman Gary Gensler clarified that the US has no plans to ban Bitcoin and other cryptocurrencies.

Some financial experts claim that well-thought-out regulation would benefit the US to make cryptocurrencies become more mainstream.

However crypto users are wary that further regulation could stiffen cryptocurrency innovation in the US and drive crypto businesses overseas.

Image source: wikipedia.org

JP Morgan Executive Warns of Banking Collapse

In a recent interview with Bloomberg Television, Bob Michele, the chief investment officer of JP Morgan Asset Management, expressed concern over the future of regional banks in the United States. Michele was particularly worried about how these banks will operate once the Federal Deposit Insurance Corporation (FDIC) and Federal Home Loan Banks (FHLB) emergency lending programs expire.

Michele’s concerns stem from the recent liquidity issues faced by First Republic Bank, which has experienced significant deposit outflows. According to Michele, the impact of these liquidity issues is not limited to First Republic Bank alone but could potentially affect the entire banking industry in the United States.

While the FDIC and FHLB programs were created to help regional banks during times of crisis, their expiration could have devastating consequences for these institutions. Michele warned that the possible collapse of First Republic Bank could cause a domino effect that could lead to the collapse of other regional banks.

Michele’s comments highlight the importance of emergency lending programs for regional banks in the United States. These programs help provide liquidity to banks during times of financial stress, ensuring that they can continue to operate and meet the needs of their customers.

However, Michele’s comments also reveal a deeper concern about the stability of the banking industry as a whole. With the recent rise of fintech companies and the growing popularity of digital banking, traditional banks are facing increasing competition. In this context, the potential collapse of regional banks could have serious consequences for the entire financial system.

To address these concerns, it is crucial for policymakers to take a proactive approach to ensure the stability of the banking industry. This could involve extending emergency lending programs or creating new programs to provide support to regional banks. It could also involve implementing regulatory measures to address the potential risks posed by fintech companies and digital banking.

In conclusion, Bob Michele’s comments highlight the fragility of the banking industry in the United States and the importance of emergency lending programs for regional banks. While the potential collapse of First Republic Bank may not necessarily lead to a widespread collapse of the banking industry, it does underscore the need for policymakers to take proactive steps to ensure the stability of the financial system.

Coinbase CEO Criticizes Chase UK’s Crypto Transaction Ban

Key Takeaways

* Brian Armstrong condemns Chase UK’s decision to restrict crypto-related transactions

* The move prompts dialogue with UK officials regarding the country’s crypto policy

* The ban poses challenges for Coinbase’s expansion ambitions in the UK

Brian Armstrong, the Chief Executive Officer of the major United States-based cryptocurrency exchange, Coinbase, has expressed disapproval over Chase UK’s recent decision to halt all crypto-related transactions. Armstrong shared his criticism publicly through a post on X (formerly Twitter) on September 26, 2023, describing Chase UK’s move as “totally inappropriate.”

Reaction to Transaction Ban

Armstrong’s comments came in response to the news that Chase UK, a subsidiary of JPMorgan, has resolved to decline all customer transactions related to cryptocurrency, citing a high level of fraud associated with crypto transactions as the primary reason. The bank confirmed this stance to Cointelegraph on the same day. According to Chase UK, customers attempting to carry out crypto-related transactions will receive a declined transaction notification.

In his post, Armstrong urged crypto holders in the UK to close their Chase accounts as a form of protest against this restrictive measure. He also beckoned UK officials, including Prime Minister Rishi Sunak and Economic Secretary Andrew Griffith, to evaluate whether Chase UK’s actions align with the broader policy goals of the country concerning cryptocurrency.

Implications for Coinbase

This development could potentially hinder Coinbase’s aggressive expansion efforts in the UK and Europe. According to the official website of Coinbase, the platform supports transactions in the UK, alongside the US, Europe, and Canada. In April 2023, Coinbase had expressed its serious commitment to expanding its operations in the UK and Europe. This ambition, however, may face challenges given the restrictive stance of major financial institutions like Chase UK towards cryptocurrency transactions.

While the UK and European markets present significant growth opportunities for Coinbase, the firm has also been dealing with legal hurdles in the US. Notably, in June 2023, the U.S. Securities and Exchange Commission (SEC) filed a lawsuit against Coinbase, alleging violations of securities laws.

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