31 October 2018

JP Morgan Chase Bank to tokenize gold bars

JP Morgan tokenising gold is big news as they have a dominant position in physical and paper precious metal markets. Digging deeper, however, I found it is more fake news than big news.

I came across this headline from a user posting this link in the Vaultoro Discord channel (I spoke with Joshua at the Precious Metals Symposium in Perth recently, Vaultoro has some interesting developments planned, you can check out his presentation at the conference here).

I first tried to verify the statement by checking the JP Morgan Quorum website, which you would think would mention it, but there is nothing there about gold or indeed any application of the platform.

A google search shows a lot of republication of the article by various crypto media but the original article appears to be from this CNN post. They don't provide any direct source for their opening statement "US banking giant JPMorgan Chase Bank’s blockchain, Quorum, will be used to “tokenize” gold bars" but following the link they provide to this AFR article, the quote them picked up on is "A blockchain platform built by global investment bank JP Morgan is being used to "tokenise" gold bars to allow sustainable miners to earn a premium on global markets".

There is a very slight difference between CNN's "will be used" and the AFR's "is being used" with the former more likely to be misinterpreted by the crypto media as JP Morgan doing it, rather than someone else using JP Morgan's blockchain platform. The key quote later in the article is:

There are people outside our firm using Quorum to tokenise gold, for instance," he told The Australian Financial Review on the sidelines of Sibos. "They wrap a gold bar into a tamper-proof case electronically tagged, and they can track the gold bar from the mine to end point – with the use case being, if you know it's a socially responsible mine, someone will be willing to pay a higher spread on that gold versus if you don't know where it comes from. Diamonds is another example."

The "he" in this quote is "JP Morgan’s New York-based head of blockchain initiatives, Umar Farooq".

The reference to tamper-proof case, socially responsible mining and diamonds is a clear reference to Emergent Technology Holdings' G-Coin, which uses Quorum. I spoke to them at the Singapore Bullion Market Association (SBMA) Asia Pacific Precious Metals Conference in June and unlike a lot of gold crypto projects this one is actually credible, addressing a real need by wholesale gold consumers with ESG (Environmental, Social and Governance) requirements. Only question I had was how much premium above spot the kilobars would sell for, as each bar has its own plastic case plus each tracked batch or dore must be refined independently (which breaks the usual refinery economies of scale) but they weren't able to provide an answer.

So in summary it seems that the crypto media misread the "will be" that CNN changed from the "is being" in the original AFR article. Just shows how fake news propagates, in this case because there are few websites these days with journalistic standards with most so-called news website not being bothered to do the simple research I just did or simply call the quoted firm to confirm the facts.

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