The Motivation Behind Big Banks Like JPMorgan to Implement Blockchain Technology on Wall Street

Major players in the banking industry, such as JPMorgan and Citi, are looking to revolutionize Wall Street by adopting a blockchain-based asset tokenization strategy. This innovative approach involves converting traditional assets into digital tokens, offering a range of benefits and diverse use cases.

Elliot Han, the head of digital assets at Cantor Fitzgerald, remarks, “Once you have these assets that are tokenized, there are so many different use cases for them.”

An analyst note from Bernstein highlights the potential advantages of tokenization, including faster settlement times and reduced costs. The firm predicts that approximately $5 trillion worth of assets could be tokenized on blockchains within the next five years.

Currently, transferring ownership of assets on Wall Street can be a time-consuming process, involving intermediaries like broker-dealers and a waiting period of two business days for settlement, also referred to as “T+2.” Banks believe that tokenization can eliminate these intermediaries and enable near-instantaneous transactions.

James Angel, an associate professor at Georgetown University, explains, “A traditional stock certificate is nothing more than a token that represents ownership of the keys of a company.”

However, the adoption of tokenization technology may face regulatory challenges. U.S. regulatory bodies, such as the Securities and Exchange Commission, have intensified their scrutiny of crypto companies. The SEC recently filed lawsuits against crypto exchanges Binance and Coinbase for alleged securities violations. Furthermore, Chair Gary Gensler has requested additional funding to regulate the rapidly evolving crypto industry.

Don’t miss the video above to gain insights into why major banks are investing millions in tokenization.