JPMorgan, NBC, Others Trial Blockchain for Debt Issuance

JPMorgan Chase and the National Bank of Canada, along with Goldman Sachs Asset Manager, Pfizer, and other companies, have tested blockchain technology for debt issuance.

JPMorgan Chase, the National Bank of Canada (NBC), and several other large companies have tested a new blockchain-based platform for issuing financial instruments, especially debt-related ones. The companies said on Friday the platform aims to streamline processes such as initiation, settlement, and interest rate payments.

The Wednesday blockchain experiment mirrored NBC’s same-day $150 million offering of a one-year Yankee certificate of deposit (Yankee CD) with a floating rate. Yankee CDs are negotiable financial instruments issued in the US by the branch of a foreign bank. To avoid confusion, NBC is a commercial bank, not  Canada’s central bank.

The blockchain platform took more than a year to develop and uses Quorum, JPMorgan’s open-source blockchain technology.

The pilot also included Goldman Sachs Asset Management, pharma giant Pfizer, and Legg Mason’s Western Asset, which acted as investors in the Yankee CD.

“Blockchain-related technologies have the potential to bring about major change in the financial services industry,” commented David Furlong, NBC senior VP of artificial intelligence, venture capital, and blockchain.

Umar Farooq, who is in charge of blockchain initiatives at JPMorgan’s corporate and investment banking division, told Reuters the group was weighing a spin-off of Quorum. This means creating a new company by selling the blockchain initiative given that it has triggered so much outside interest.

He also noted that dealing with calls for help has become time-consuming. Nevertheless, JPMorgan doesn’t plan to charge for assistance given that blockchain support is not the company’s responsibility, a person familiar with the matter said.

Farooq declined to identify any companies interested in JPMorgan’s blockchain business.

He acknowledged that blockchain is still at its nascent stage but voiced strong confidence in the technology.

“We haven’t really seen a lot of really large scale things go into production yet. There are few cases where blockchain can really shine,” he said.