JPMorgan cautioned investors about holding Bitcoin and other cryptocurrencies in their investment portfolios/Bloombergby Bloomberg
JPMorgan Chase & Co. is broadening its perspective on blockchain technology to show how digital money will change the financial world.
The emergence of linked databases like the blockchains that enable Bitcoin and Ether to exist as well as changing consumer preferences has turned the modernization of payments into a global theme.
Projects that have broken through to the real world include some equity trades that are now being settled on a blockchain system created by Paxos, while JPMorgan’s digital coin debuted last year to allow the bank to facilitate cross-border payments with a digital asset. JPMorgan noted that China is developing its own digital yuan.
In a report, JPMorgan said that 2019 will be remembered for the rise of digital money. “The groundwork is now in place for more mainstream adoption of blockchain technology at the same time that the foundation is being established for the development of digital currency and fast payments,” added JPMorgan.
Still, challenges remain. One of the most visible projects last year was Libra, a group of companies spearheaded by Facebook to create a digital token to compete with fiat currencies in the huge market of cross-border payments. Libra faced an intense backlash from members of Congress and European officials and JPMorgan struck a cautious note about it in the report.
Blockchain is promising for banks and corporations, if they can figure out how to use it. By combining many users or companies on one blockchain, or ledger, transactions can be done in near real-time with certainty, which proponents claim will produce billions of dollars in savings. Yet most corporate efforts are still in early development or testing.
JPMorgan also cautioned investors about holding Bitcoin and other cryptocurrencies in their investment portfolios.
Additionally, the bank said that developments over the past year have not altered our reservations about the limited role that cryptocurrencies play in global portfolio diversification or as a hedge instrument.