Ethereum’s ConsenSys and JPMorgan’s Quorum discuss merger

JP Morgan, the renowned financial institution, is reportedly in talks about the merger of Quorum, its internal block chain division, with ConsenSys.

In an exclusive report from Reuters, the newsroom reported that the block chain “Quorum” of banking giant JPMorgan and Ethereum development studio ConsenSys “are discussing a merger, according to people familiar with the plans”. The report states that the deal between JPMorgan and the tech company founded by Ethereum co-founder Joseph Lubin will be announced within the next six months. However, the financial terms of such a deal remain unclear.

Quorum is allegedly an “open source block-chain platform” based on the Ethereum platform, which was built for corporate use.  JPMorgan currently employs a team of approximately 25 people in its Quorum block chain unit. Not only is Quorum built on the Ethereum block chain, but JPMorgan’s JPM Coin also runs as a stablecoin through Quorum, enabling instant payments between institutional accounts. The report added:

“A merger with ConsenSys was chosen as the best way forward, as both organizations work with Ethereum and have been involved in joint initiatives in the past”.

The merger of ConsenSys with Quorum would allow the latter to “shift towards the growth of its software division”, he added. In May 2019, JP Morgan had teamed up with Microsoft Azure to give Quorum a power boost. The partnership gave the teams “access to tools for writing and testing block-chain code” managed through the Azure cloud. Interestingly, Quorum will be the platform on which JP Morgan will issue its digital coin, JPM Coin.

JP Morgan had announced in February 2019 that the JPM Coin would be used to process “internal transactions” between the bank’s customers in the context of large-value payments. This block-chain-centric development aimed to facilitate the Bank’s multi-billion dollar settlement processes for cross-border transactions. Umar Farooq, JP Morgan’s head of block-chain projects, was quoted as saying

“The [block chain] applications are frankly quite endless; anyone who has a distributed ledger involving companies or institutions can use it.”

 

Quorum is also used to operate JP Morgan’s Interbank Information Network [IIN], a peer-to-peer block chain-based banking network that enables “real-time information exchange”. While the report in question stated that there would be “no impact” on the IIN and “other JPMorgan projects” of Quorum, the news could be extremely powerful, at least from a purely financial perspective.

According to the report, however, it is still unclear whether the Quorum team will move to ConsenSys after the merger. Furthermore, it is unlikely that a formal deal will be announced as soon as talks are still ongoing. The financial details also still need to be confirmed.

 

Trend of traditional financial mergers with Fintech start-ups

This step would mark a further change in an ever-changing horizon, with more established financial institutions emerging or merging with agile fintech start-ups. Just last month Visa agreed to buy Plaid, a company that gives apps like Venmo and Square Cash access to financial accounts. It should also not be forgotten that when Bitcoin was launched more than 11 years ago, it was immediately rejected by traditional banks. In fact, Jamie Dimon, CEO of JPMorgan, was one of the most persistent critics who repeatedly called Bitcoin a “scam”.

However, as the Blockchain began to demonstrate its advantageous qualities, the banks began to push to get on board the “Blockchain train. They became involved in a kind of patent race in which Bank of America, which had filed around 50 blockchain patents in 2018 alone, took the lead.  The results so far have been mixed, although there seems to be a clear preference for Ethereum. Both JPMorgan and Spanish banking giant Santander have chosen this block chain over Bitcoin. In fact, Santander recently issued a $20 million bond on the Ethereum blockchain.