Banks and blockchain may soon be together.
Tokenization, the blockchain representation of ownership of real world assets (RWA), has become a hot topic in the Web3 industry during this time, with banks and financial institutions being a key part of the real world asset space, although their blockchain activities Largely limited to the use of permissioned networks, but has begun to look at money market funds, real estate asset tokenization. Next, let us take a look at the actions of several financial giants in this field:
JP Morgan and Ethereum
In fact, for JPMorgan Chase, RWA tokenization should be nothing new. As early as 2015, JPMorgan Chase launched the blockchain plan and released the Quorum blockchain. The bank's Onyx digital asset platform uses JPMorgan Chase's own token JPM Coin for settlement. So far, more than US$900 billion in transactions have been completed (of course, for a banking giant that processes more than US$8 trillion a day, US$900 billion seems to be a drop in the bucket).
Whether it is reputational risk or compliance risk, getting JPMorgan to move to the public Ethereum mainnet has always been a delicate matter. Tyrone Lobban, head of digital assets at Onyx, pointed out that over time, the Ethereum chain consensus mechanism has shifted from proof of work to proof of stake (the former is more energy intensive, which gives ESG-conscious banks a reason to choose the latter). Adding better expansion technology and multiple data layer plans on Ethereum can also meet the needs of enterprises.
Today, concepts such as "subnets", "supernets" or "hyperchains" have emerged on Ethereum. For JPMorgan Chase, it can still benefit from the highly redundant and durable settlement tracks in the public blockchain while meeting anti-money laundering AML and KYC compliance requirements.
Franklin Templeton Effect
Investment giant Franklin Templeton currently manages $1.4 trillion in assets. According to Sandy Kaul, the company's head of digital assets, Franklin Templeton began exploring public chain technology based on real-world assets as early as 2019, and has begun deploying some transfer agency businesses on the chain, such as recording the ownership and purchase of mutual fund stocks and understanding the hidden costs of related transactions.
“Franklin Templeton has run a parallel pilot program to demonstrate to the [Securities and Exchange Commission] that the books and records maintained on the public blockchain are correct and function the same as the traditional transfer agency record books,” Kaul said. “We satisfied the regulator and have been running the fund as a token on a public blockchain for a year and a half.”
Citibank’s Token Services
Like JPMorgan Chase, Citi is not a novice in the field of digital assets. The banking giant launched blockchain-related work in its innovation lab as early as 2015. In early 2023, Citibank also hired Ryan Rugg, a veteran of enterprise blockchain, former IBM executive, and R3 blockchain expert, to lead the newly established token services department.
It is reported that Citibank's tokenization pilot is conducted on the basis of a licensed blockchain and currently only processes business in the United States and Singapore. In addition, Citibank has also built a "Regulatory Responsibility Network Proof of Concept" project with the Innovation Center of the Federal Reserve Bank of New York and several banks and industry participants to promote interoperability between bank tokenized legal products.
Ryan Rugg further stated: “I sometimes joke that I may know more about what not to do than what to do - because I have extensive experience in technology companies large and small, building alliances and observing the development of applications. One important lesson I learned is that you can’t let a large entity own the network. We recognize that customers need multi-bank, multi-jurisdictional cross-border liquidity. They don’t want an isolated system, but want to be able to freely flow funds between multiple banks, simplify operational processes and optimize their liquidity in the market.”
Summarize
There is no doubt that many financial institutions and technology companies around the world are laying out the RWA track. The optimistic expectation that "RWA will gradually break the barriers between the crypto world and the physical world in the real world in the next few years and start "moving more financial and economic activities to the chain" has injected new possibilities into the Web3 world. The crypto community is also very concerned about the possible risks of RWA and how people can pay attention to and try their best to preserve their personal rights and interests in the RWA ecosystem, and expressed key positions such as "it is feasible to move from Web3 to reality, but it is not feasible to move from reality to Web3".
In fact, in the financial game, the public and the government and capital giants have different views due to their different roles and interests. Regarding the attitude and acceptance of RWA, the public around the world expressed different attitudes from the Hong Kong government and the mainstream capital market: unlike the government and capital giants who are eager to promote RWA to solve the financial dilemma, the public is more concerned about the healthy development of the entire Web3 industry and the possibility of protecting the personal rights and interests of each participant. This phenomenon also reflects that as a key step in the development of the Internet from technological innovation to user concept innovation, in the Web3 economic paradigm, rights and interests are very likely to be more inclined to the possibility of users.
Now that JPMorgan, Citi, and Franklin Templeton are in the game and are digitizing traditional assets, will they eventually trade on crypto networks like Ethereum? Let’s wait and see.
This article comes from Bitkoala Finance
