Banks, financial institutions to embrace Ethereum

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Banks, financial institutions to embrace Ethereum

Banks and financial institutions are at the other end of the spectrum, whose blockchain activities have been largely limited to using permissioned networks and are attracted to purported cost-saving efficiencies. The companies are now looking at tokenization roadmaps that would digitize everything from money market funds to big but illiquid private markets and areas like real estate. Public blockchain ecosystems are at the other end of the spectrum, looking for asset diversification to fuel areas like decentralized finance.

In the wake of the price crash and the FTX exchange collapse, financial institutions will likely proceed cautiously in the U.S., where regulatory authorities are discouraging them from touching anything related to crypto. By contrast, Europe and Asia could steal a march on the U.S., given the relative clarity in these jurisdictions.

Edging towards the Ethereum mainnet has always been a delicate business, given that banks have consistently viewed public blockchains as more or less radioactive, both a reputational and compliance risk. Tyrone Lobban, JPMorgan's head of Onyx Digital assets, said that the Ethereum network has progressed over time, from the proof-of-work consensus mechanism to proof-of-stake. He said projects on Ethereum could cater to the needs of enterprises over time by adding better scaling technology and multiple data layers.

Essentially, these things are a more controlled space on a public blockchain, Lobban said.

Re keeping on the public blockchain are correct and equal to the traditional transfer agency book of records, Kaul said.