Mainstream Adoption of Digital Currencies Is Still Many Years Away: JPMorgan Blockchain and DLT Report

A recent report published by JPMorgan Chase, the world’s sixth-largest bank with around $2.5 trillion in assets, indicates that present blockchain and distributed ledger tech (DLT) developments are laying the groundwork for issuing digital currency, however, mainstream adoption of virtual money might still be many years away.

JPMorgan’s report, released on February 21, 2020, noted that the global finance sector is now moving beyond blockchain or DLT.

As mentioned in the bank’s paper, the foundation for mass adoption of DLT, quick payments and virtual currencies is now in place. Moreover, the adoption or integration of blockchain into banking platforms is around three to five years away. JPMorgan pointed out that initiatives like the Facebook-led Libra stablecoin may lead to a greater level of centralization.

The report noted:

“For a stablecoin like Libra to succeed, it will likely require short-term liquidity facilities, a source of positive-yielding reserve assets, and less distributed, semi-private networks.”

The paper went on to mention that the cryptocurrency industry may now be maturing, as significantly more institutions are dealing in digital assets. Many new contracts have also been issued on regulated exchanges.

But the research team at JPMorgan also mentioned that cryptocurrencies continue to exhibit extreme volatility in their prices. The bank’s report states that Bitcoin (BTC), the flagship cryptocurrency, has “intrinsic value but has yet to demonstrate its value for portfolio diversification.” 

The report added:

“Developments over the past year have not altered our reservations about the limited role that cryptocurrencies play in global portfolio diversification or as a hedge instrument.”

It continued:

“Crypto-assets have a place in investors’ portfolios only as a hedge against a loss of confidence in both the domestic currency and the payments system. Cryptocurrency volatility has fallen, but remains about five times greater than core markets like Equities or hedges such as Commodities.”

JPMorgan is among the world’s leading banks that is actively involved in cryptocurrency and DLT space. In June of last year, Umar Farooq, the bank’s head of digital treasury services and blockchain efforts, revealed that the institution would be piloting its JPM Coin (which is a digital currency) with a select group of clients.

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