R3 confirmed on Thursday that finance giant JP Morgan Chase & Co had left the “blockchain” banking consortium.
JP Morgan Chase Bails on R3
This follows from the recent departures of Goldman Sachs, Morgan Stanley and Banco Santander.
R3 aimed to develop blockchain technology in order to refine some of the more expensive banking practices.
Using the “blockchain” invention of psuedononymous Bitcoin creator Satoshi Nakamoto, where a distributed ledger of data is maintained by a network of computers running applicable software, R3 hoped to use to improve efficiency in areas like money transfer and settlement times. They were known to be working towards creating a “private” blockchain where only a selected amount of users were able to see the ledger.
Using a blockchain to send data in Bitcoin requires an open, public ledger, and bitcoins are generated as a way to incentivize users to maintain security of the network (by running the software).
This allows for trustless transfer of data and banks were hoping to adapt it to their needs, while still adhering to the onerous regulatory environment in place for financial institutions. In New York, for example, Bitcoin businesses have been forced to apply for a ‘BitLicense’ in order to operate.
‘Blockchain Not Bitcoin’
While the financial institutions involved with R3 were never likely to have used Bitcoin itself, they need to navigate a difficult path.
Many in the cryptocurrency industry scoffed at the suggestion that banks would sufficiently trust each, or respect the privacy of their competitors, enough to work together. Members of R3 like JP Morgan Chase and Goldman Sachs have been heavily fined in recent times for breaching laws and regulations related to the 2008 financial crisis and scandals such as LIBOR and EURIBOR, where a crucial interest rate that measures risk was rigged allowing banks to save millions.
The R3 initiative was seen as a way of bringing finance into the internet age, keeping up with new technological innovations like cryptocurrency.
R3 has been the main player behind the meme of “Blockchain not Bitcoin” and had secured the services of some prominent members of the initial Bitcoin community, including infamous former Bitcoin developer Mike Hearn and consultant Tim Swanson.
Despite pouring millions of dollars into the endeavor, the project seems to have stalled in recent months, although other blockchain initiatives exist within the sector.
Do you think mainstream banks are starting to lose interest in closed blockchain projects? Let us hear your thoughts down below.
Images via Mike Segar/Reuters, R3