Seven Indian banks have reportedly joined JP Morgan blockchain platform known as Interbank Information Network (IIN) in a move to make global exchange of financial information faster and secure. The banks include YES Bank, ICICI, Union Bank of India, Federal Bank of India and Canara Bank. At a time when financial blockchain ecosystem is undergoing heavy scrutiny of the Indian government, this move is a milestone. This is even more true because JP Morgan’s blockchain Interbank Information Network (IIN) may use a native cryptocurrency JPM coin to help move funds and provide liquidity.
JP Morgan’s IIN aims to make global banking faster and more efficient by exchanging and verifying transactional data in real-time. IIN is based on Quorum- a permissioned distributed ledger whose code was forked from the Ethereum public blockchain. But unlike the Ethereum network, Quorum is not decentralised and is controlled by JP Morgan. The network is very similar to Facebook’s Libra project which unlike JP Morgan’s project faced huge backlash from regulators due to data privacy concerns. After the blockchain pilot in 2017, JP Morgan’s Quorum has enjoyed an extensive network of participant banks- standing at about 350 global banks, which collectively own trillions of dollars in assets.
Apart from India, JPMorgan’s blockchain payments platform saw the onboarding of one of Singapore’s largest bank OCBC. Apart from Quorum, other blockchain companies like Google backed Ripple and IBM backed Stellar have launched similar networks to expedite the flow of financial data.
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How Indian Banks Can Benefit From This JP Morgan Blockchain
Apart from being fast, JP Morgan’s IIN blockchain network aims to keep data secure and free from data tampering. This is crucial for banking networks so fraudulent loans, cash flows, diversion of funds do not go unrecorded. Experts have said in the past that India’s PNB fraud case had not happened if global financial messaging network used blockchain based consensus systems. The initial application on IIN wants to create an infrastructure for financial institutions to exchange data on global financial compliance and AML purposes, the bank said.
According to JP Morgan, IIN’s vision is to get rid of pain points friction points in global remittance systems and build services and financial products, the bank told. “We look to address the challenges banks face in cross-border payments pertaining to friction points caused by multiple hops through the payment chain when further information is required,” said Madhav Kalyan, CEO, JPMorgan Chase Bank, India in a media statement.
Quorum Blockchain : What About Financial Data Privacy
When it comes to financial data, user data privacy is paramount. This is one area where Facebook’s Libra blockchain protocol failed to convince critics. To help with the issue of user privacy, the IIN network implements a layer zero-knowledge proofs (ZKPs) used with the Ethereum blockchain protocol. Also, the JP Morgan team partnered with Microsoft for Azure blockchain platform, and changed Quorum’s privacy layer written in the Haskell computer language with Tessera , which has a comparable design, however is written in Java to make it simpler for organisations to utilise the privacy layer. This is done for enterprise-wise adoption of the network. Also, it seems that the Quorum network will continue to implement the open source innovations of the Ethereum community to make its network more robust.
Blockchain is seen crucial for banking innovation as it leads to better transparency of data as well as improve trust between the parties involved. It is for this reason that we have a surge of demand for blockchain developers, particularly in the financial sector. Indian banks certainly want to keep up with this innovation. But, the Indian government has mandated that financial data should remain localised within the borders, and therefore it will be interesting to see how Indian banks will participate in global blockchain networks. Also, we are increasingly seeing participation of Indian companies which are seeking membership in global blockchain networks. Apart from the Indian banks joining JP Morgan’s IIN, we also recently saw Tata Communications gaining board membership of the Hedera blockchain network.