JPMorgan Crypto Strategy Revealed | Tyrone Lobban

Transcript

hey everyone before we get into today's episode I want to take a second to acknowledge vouch with over 4 000 startups insured from napkin sketch ideas to large IPOs vouch is the insurer of choice for crypto companies including l1s l2s Dows protocols and a whole lot more they're exclusive coverages are enhanced for crypto covering everything from regulatory defense to Smart contract vulnerabilities with vouch you're not just ensuring your startup you are investing in peace of mind so you can keep on building you'll hear more about vouch later in the show all right everyone welcome back to an episode of Empire super excited we have the head of blockchain and Onyx digital

assets from JPMorgan Tyron Lavin welcome to show Tyron thank you so much so much for having me super excited to be here yeah pumped about this um I think the the best place to start this episode would would actually just be very high level and then we can go into some of the key things that you guys are working on and I want to get like the why behind what you guys are doing so let's start with just what is Onyx and specifically like how big is this team why does it exist where in the organization right JP Morgan's massive Enterprise where in the organization does your team sit uh and then I think that can kick off this conversation yeah I mean I realize that Onyx from the outside is probably the sort of nebulous strange thing and you know how does it actually relate to JP Morgan uh it's

actually a business unit within the bank so we sit within our corporate and Investment Bank which is where our markets business is our you know actual um IB is as well all our payments operations our payments front office Etc so we said within the CIB we actually um for legacy reasons set within our payments organization which is why we have such a strong uh payments angle to a lot of the act the the work that we do within Onyx but um it's really especially from my perspective and the work that I do cross firm so we don't just work with our CIB we also work with our retail bank so a Chase within the US and more recently with our asset and Wealth Management Group uh Onyx is almost 300 people we're about 275 people

um that is made up of product engineering uh operations legal you know really the gamut because um it is a business and so we have to you know ensure we're operating as such uh and within Onyx we actually have four business Stripes so so four uh sub businesses within the group uh one of them is called link so this is focused really on information flows and specifically around cross-border payments then we have our basically our value transfer business which is JPMorgan coin systems so you would have heard about JP Morgan coin we can talk a little bit about that and then we have Onyx digital assets which is the

platform that we have for tokenizing traditional assets and then finally our blockchain group which is really everything to do with web3 we focus a lot within you know what are the web free like uh innovations that are happening that we should be concentrating on as a bank and thinking about how we can be creating products around those specific Solutions so that's the sort of what it is I guess the other question is why you know why do we have this big group of people uh focus on these these specific areas and and blockchain as a technology and that sort of goes back to when we started our blockchain group actually in 2015 just as a you know a small group of people you know it was really a handful

um focused on new products and emerging technology and blockchain was one of the technologies that we were looking at at the time you know late 2015 thinking about how it could be beneficial or disruptive to JPMorgan and through that we actually embarked on you know a whole program of experimentation ideation analysis on the different areas of finance that this Tech can actually you know either create real value for or completely change the way things are done and so over the subsequent sort of seven years I think we we did something like 70 to 90 proofs of Concepts some of

them obviously that didn't go anywhere many of them actually have informed the work that we do today though and then in 2020 we actually decided that we had enough proof points that this Tech was meaningful enough for us as a bank that we needed to set up an entire business unit around it and that was a that was actually the creation of uh you know ebonics yeah the biggest shift that I've seen I I'm sure Santi remembers this but um I remember when you guys had Quorum right and Amber ball day was leading that I think that was maybe 2017 or 2018 and that was basically a private blockchain right that was a fork of ethereum the biggest shift that I've seen JP Morgan take with your guys's crypto strategy or blockchain strategy is moving from a private blockchain to a

public blockchain right now now you guys are actually building things and executing trades right on ethereum tell me about that shift from private to uh to public and why that happened yeah well I would say that it's um it's an in-flight uh sort of process so we we certainly have certainly haven't fully shifted to public blockchains uh and in actual fact you know the the trade that you're referencing was the start of a journey for us uh that we we really feel is the right trajectory in terms of moving towards public blockchains but you know quite clearly since the whole FTX debacle back end of last year from a regulatory perspective that has become somewhat challenging so for now our work

is very centered in the permission blockchain space and we do actually use Quorum under the hood for our tokenization platform Onyx digital assets for our JP Morgan coin work uh and and also for a link um however we've been very deliberate about ensuring that we have this you know public blockchain Nexus as a very sort of strong strategy for us and so Quorum is an important part of that that sort of mix right having an evm sidechain or a series of EDM side chains means that we can you know write solidity contracts all of our development users the same tooling that you would use you know in developing on public ethereum or polygon or any of the

other sort of evm based protocols um the work that we're doing is very much centered around how we can think about a few future state where we can actually be much more focused on public blockchain once we have some things sort of proven out and you know those things are in addition to you know regulatory buy-in um you know focus on privacy aspects obviously kyc and AML and so we have a strong identity Focus there but even things like scaling are important um in some sense as well so I would say it's a it's a shifting and sort of evolving process for us but permission blockchains you know for where we are right now and specifically from a

regulatory perspective are the the means by which we can actually create value and show why blockchain actually makes sense as a technology for finance where does buy-in stop at JPMorgan for for blockchain does it stop with you and the executive team is kind of like ah Tyrone's kind of playing in the sand over here does your does your boss like it does right does it go all the way to the top like where where does that buy-in stop at Jacob Morgan I think that one of the reasons why JPMorgan is so different to almost any other traditional Finance uh player globally um and why we've been able to make so much progress is because we've had sponsorship right from the top I mean

Jamie Diamond himself is you know he is the one who has been championing from the from the early days that blockchain technology can be really impactful um Onyx itself um you know that is a business that has been created through support from both Jamie dimon and our CA the CEO of our CIB Daniel pinto and so there is a huge um you know sort of support base at the senior Bulls of JP Morgan around the work that we're doing and so I think that mandate is something that has given us the ability really to one have the early stage experimentation but to transform that into something where we can actually generate revenue for the

bank and for our clients and obviously get cost savings um so as much as I'd like to say you know the buck stops with me um there's definitely there's definitely people above me that are supportive as well um well Tyrone I'd love to deconstruct a lot there's three different components four different that I heard you talk about that you guys are focused on maybe if you just give us a brief overview of what those mean and then we can dive deeper into some of those as we go I'll jump into the the four aspects of Onyx so um we'll start with this problem that we have identified around payments right specifically International payments and so when you think about it there is not really a Global Payments infrastructure

there's a sort of mishmash of you know local networks um that are specific to a country that in the most uh case work very well but when you actually get into cross-border they actually start to break down and so the Global Financial Services and specifically payments infrastructure is really a connection of correspondent Banks and you know different Ledges that are not connected and this challenge means that when you actually looking to make an international payment it's a multi-day process you know it obviously has high high fees for anyone who's trying to you know send money internationally it's not exactly the the best thing you're going to do in your life

um and so really we looked at this and we thought well you know clearly if you take a look at what a blockchain is this shared Ledger the shared infrastructure if you can have these International correspondent Banks sharing that same information having real-time visibility of uh the information associated with a payment you can actually start to simplify a lot of what it means to move money internationally and so that's really where a big focus of ours is on the on this link platform that we have come into you know just money in general um and here we here we're actually looking looking at the you know the physical movement of of money obviously everything is electronic pretty much but

ultimately you need to move money from my account sitting here in London to you know you're sitting in New York and that again sort of runs into the same challenge of there is not a Global Payments Ledger or a set of infrastructure that talks to each other very seamlessly and you know we're all very familiar with stable coins and just you know cryptocurrencies in general and how it's so easy to move value when you're using blockchain technology that's really what we've brought to you know wholesale payments in the form of JPMorgan coin and then and then uh on the tokenization front here we're thinking about the financial markets in general right so

when you look at security settlement all of the post-trade activity that is involved in you know transferring ownership of One Security uh from you know one party to another it's an incredibly complex web of actors participants uh you know you obviously have broker dealers custodians you have Central Securities depositories in some cases you have transfer agencies all of these actors exist really to do uh one thing at its core which is when I'm selling a share to you that those records basically need to be updated to say you are the new owner uh and that is complex to do when you have this disparate infrastructure and these

desperate players and you know again when we look at what blockchain technology can bring this sort of shared Ledger and if you think about just any basic token that encodes with you know the ownership of that token quite clearly that's a you know a model that seems very interesting and something that can be highly impactful to this idea of moving the financial assets around so that's a big Focus for us and then obviously all of the web 3 side of things relating to Identity and D5 we think that those can be impactful in in new ways that traditional Finance has not actually being able to you know tap into just yet yeah how much of that is internal versus coordinating with other Banks um I would say that uh so two things

here one is obviously you know JP Morgan is a very broad set of uh businesses we have markets business we have a custodian we have our payments business we have an asset manager what that means is we can move quite quickly by ourselves you know we can actually prove out things because we have the end-to-end life cycle of course we're not here to just you know like create a blockchain infrastructure within JPMorgan I mean that's unnecessary we can just use regular databases um but it does give us the proof points to say this idea actually makes sense and it has you know moved the needle for us as a set of businesses so that takes us to the second point which is you know

once we have a stronger idea around some specific uh you know solution we can actually start to bring in other players as well so you know the Onyx digital assets platform for example has you know Global broker dealers signed up Goldman Sachs is on the platform BNP is on the platform DBS for example we have a number of others that we haven't been sort of public about but also large asset managers so BlackRock as an example um you know they are tokenizing or looking tokenize money market fund shares through the Onyx digital assets platform so it's very much a platform and our strategy is um you know being able to do this for the industry and with the industry

right when when you are talking to some of these broker dealers or clients about the benefits or even internally with someone like Daniel Pinto or Jamie like what is the like the the proof point the ROI tangible Roi that you tell them like how do you how do you sell this internally how do you sell this to the market of hey look we're saving x amount of basis points uh per trade or we can let you know we can streamline operations and compliance by X percent like how do you maybe if you can just share some of the like proof points around some of these Pilots would be great yeah uh and it varies that varies by use case um so let me start by saying um we're processing about between one to

two billion dollars a day of tokenized assets through our Onyx digital assets platform uh since we launched in 2020 we processed almost um almost 900 billion dollars worth of assets and so that sort of like you you know goes to show the scale at which we can move assets and we can actually bring these new use cases to life and the reason why in this specific case um for you know what we're actually doing on the platform here is actually making it cheaper for our clients and even for JP Morgan to get access to liquidity intraday so the specific use case is you know we have clients who borrow funds from JPMorgan during the

day uh you know for whatever purposes they need oftentimes they borrow those funds on an unsecured basis meaning they don't have to put up collateral they're basically is drawing down on a on a credit line but that can be expensive especially for our bank and broker dealer clients who ultimately would then have to hold some reserves on their own balance sheets to prove to Regulators that in times of stress if JPMorgan withdraws that credit line they can still actually make those payments and so that costs that cost of capital is something that they have to sort of you know wear in some sense what we can actually now provide is the ability for them to enter into an intraday borrowing facility where they are actually putting up collateral and and being able to

borrow against that but they're able to do it using a standard Financial instrument a repo a repurchase agreement which is you know one of the most widely used financial instruments in the in the financial services Market but where where this becomes a challenge to use in you know regular way life is that a repo is not something that can settle in the same day I.E I can't give you assets as collateral and you give me cash and at the end of the day we do the reverse like I give you your you know your cash back with blockchain and specifically with smart contracts and this idea of tokenizing traditional assets we can actually now do that we can tokenize U.S treasuries we can tokenize cash in the form of JPMorgan coin and we can

actually you know instantiate these assets as smart contracts and this trade as a smart contract and now you can have very very precise times as to when you're going to enter into the trade and when the funds are going to be returned and so what that actually looks like specifically is a reduction in cost right you can actually show the basis points um reduction and we estimate that you know by by the end of next year for our markets business there will be a saving on the order of like 20 million dollars so it's not like you know massive in the grand scheme of things but it's not immaterial either and so we use these Blue Points to actually you know build out further use cases and and expand into other asset types as well and like that's internally but like if you're a client where you're entering

that repo facility I would assume that there's also bonus foods for them right in terms of flexibility or even you know I don't know maybe better terms versus working with another bank I guess right I mean it's it's this idea of um can I get access to Capital in a lower cost way can I be more efficient with my Capital you know instead of having to lock it up overnight can I actually get access to those assets today um and can I be more precise about how I'm going to be using my funding all of those things especially in a you know in a kind of tightening rate environment or in times of stress around liquidity become really really important and actually impactful and then the the

additional thing is this idea of added utility right all of a sudden you can use your assets in a way that you couldn't use them before and we're seeing that specifically in the asset manager Community where you know we have asset managers like BlackRock who are looking to tokenize money market fund shares and the reason why they're looking to do that is because they want to provide utility to their investors who are actually looking to you know potentially pledge those shares as collateral instead of redeeming out of the fund going to get access to cash now going to post that Cash's collateral the investors can just stay invested and use those shares in a way that they couldn't have and so it's not only like the cost

savings but it's the additional utility that these clients are able to get and actually offer to their own clients just uh to give folks a sense of perspective on the number of uh you mentioned this figure close to a trillion dollars like up to this point I believe like yeah that's what I mean that's still a very small percentage of the aggregate flow that you guys are handling but how does that trend line looked over the past couple years um and and how do you think about that Evolution going forward like in the next five ten years yeah and also on your teachers to hear Tyrone how much do you how much do you guys process in a day like is it 5 trillion ten what what is the magnitude here you know yeah yeah

um so in terms of like the the trajectory and the growth we've seen in the first half of the year uh in 23 we process as much as we processed through the whole of 22. um so that you know is quite a significant uptake and that's through a couple of things one is you know more clients coming onto the platform but also clients seeing more value and actually looking to use it uh more frequently than what they were so and I think we're going to see um you know maybe that double through next year so the trajectory is is fairly strong and you know you're totally right like this is still sort of small numbers in the in the grand scheme of things but I think the proof point is real right like the fact that we have Global

clients looking to use these products and in some sense almost not caring that it's blockchain right they just want access to this new feature basically right um is a really strong signal for us um in terms of like you know what this actually looks like from a magnitude perspective so in the payments business we process so in the traditional payments business this is you know completely away from blockchain just our traditional payments flows we process 10 trillion dollars every day and you know that's a big number and I think this is also a reason why you know we have started to look at creating different types of payments products that are not quite stable coin like

right and by that I mean when I when we talk about JPMorgan coin what we're actually talking about is a blockchain based bank account like it's a it's a really bad name JP Morgan coin because it's not actually a coin it's just a blockchain based account and it means that it's a deposit you know that represents a deposit liability uh from JP Morgan's perspective and so you know our institutional clients who can now access JPMorgan coin basically have all of the guarantees that they would have um for any other money that they hold with JPMorgan and that means that we can start to think about the scale of you know those 10 trillion dollars of payments that we possibly couldn't get to if we were just

implementing a pure you know fully reserved stable coin uh like instrument Tyron what are your thoughts on usdc and it's obviously had a tremendous amount of success but what are it sounds like when I hear you talk about kind of tokenized deposits that's almost a different take on how to build a stable coin in a sense yeah what's your take on almost the pros and cons of usdc I I think uscc is obviously incredibly important for the the crypto industry right I mean it is in in my sense pretty much the the killer app of sort of retail crypto um because it does solve the the key problem of moving money and moving money quickly and cheaply and you know we

spoke a little bit about how challenging that is in the the current infrastructure the current environment because of this like you know basically uh it's very fragmented uh set of Payment Solutions so I think having usdc and specifically having um you know a reputable company encircle actually offering that solution now now in other currencies you know obviously they have Euro coin which is uh still growing but it's a really really important proof that this technology can make a real difference in in in this case from a retail perspective I think where and you know this this sort of thesis still needs to be played out but I think where usdc is going to hit a cap is going to be at scale so

when I talk about the 10 trillion dollars that we're processing every night and I you know I was looking this morning I think the the market uh sorry the 24 hour volume for both usdc and usdt is like 25 billion or something that's like 400 times less than what we do every day and if you think about having to fully Reserve 10 trillion dollars uh to be able to make those payments every day that's a lot of liquidity that you're taking out of the system um and that's you know really actually has a negative impact and you can't really start to create uh creative creation like you can't actually enact credit creation and issue auto loans and mortgages if you have this huge balance

of liquidity that's locked up so I think that usdc has you know 100 a place to play I don't know that in its current construct it can play at the institutional level which is really where you know I think a bank like JP Morgan comes in and starts to offer a slightly different product but has the same same benefits so what you're basically saying is USBC is not for it's what you're saying is there needs to be a stable coin but with a built on a fractional Reserve System yeah I mean the common criticism of D5 has been it's it's highly inefficient because you can't do this fraction it's fully collateralized and attempts to do under collateralization have failed because there it's sort of this civil problem

you don't know who's at the other end of the you interact lava you don't know who's on the other the counterparty right so one of the things that I've thought about is okay what's it going to take for JP Morgan to settle stuff on chain with Goldman or with a hedge fund X or Y in a hybrid type of environment where it's maybe like a permissioned version of Ave where you're using a Switzerland L1 call it ethereum uh but you know your counterparty hey if there's ever a dispute like the smart contract logic is very clear yeah so that to some extent allows you to do certain things that you can with the traditional Financial system meaning

things close you know on the weekend and after hours and whatnot but if there's ever a dispute you know who the counterparty is you can go to court like credit is always throughout history but enforced with violence or perceived level of violence at the end of the day um so what's it gonna take to for you guys and for Goldman and other institutions to do you think that that is likely the the evolution where you guys end up tapping into D5 or do you say hey look no that's gonna exist on this for for these kind of on the fringes we're gonna build our own um with other financial institutions use our network but maybe tap into ethereum through a side chain or something like

how do you guys think of all that I mean what you're describing is is almost exactly what we did last year under this project called Guardian with the monetary authority of Singapore um and you know what we essentially did was uh we created tokenized deposits positive tokens of both Singapore dollars and Japanese Yen uh we issued those onto the polygon mainnet we stood up a specific version of the Ave awk protocol that has you know permissions in terms of who can actually access uh the the D5 pools um we created pools for both Yen and Singapore dollars and then we built in this identity system using verifiable

credentials that all together showed how traditional Financial Services can actually interact with defy in a compliant way because as you said like if you can get to that if you can get to the transparency and trust that those protocols can offer with a persistent highly available highly redundant settlement rail like ethereum well that has to be a better a better infrastructure than what you could otherwise have right and and pretty much what we have today and so the test was you know highly instructive for us in terms of uh working out how to actually use these pools how to do this and as I said in a compliant way um and you know it also showed us some things that still need to improve uh one

of them you know we actually hit this problem during the test where there was this massive nft drop on on polygons was uh right we had this FX transaction that was sort of like waiting there and we're like okay let's up the gas and try and get this thing through which is fine for a test but you know you can't really operate at scale uh and you can't do anything that is time sensitive you know when I spoke about the uh the repo product that we have those are very very time sensitive trades right you actually need to settle at a specific time and so uh scalability is important having the ability to you know not be impacted through the sort of like Noisy Neighbor problem is important privacy is highly

important you know there's obviously a big discussion in the in the community around privacy and obviously from a financial services perspective like we can't have the position where you know our competitors can see our trading position for example um so privacy is one and then you know clearly the kyc aspect is something that we have to abide by from a regulatory perspective um and ensuring that we're not enabling money laundering so those are some of the things that need to come into being in a more robust way for us to actually be able to fully step into you know a public defy or public blockchain environment but you know as I was saying at the Top This is actually why we have set ourselves up in the way that we have because we do think that there is a path

there and we want to build all of our products and infrastructure to be compatible so that we can effectively lift and drop yeah I was going to ask you on the Privacy stuff I mean obviously this has been a persistent problem in the industry like you know front running is a big problem and you don't want to ever show your competitor what trades you're doing and how you're doing it um is there an active effort within the organization to to create a solution around that or are you waiting for others to kind of Leverage Journal proofs or something to where you can adopt and integrate we've been active around privacy probably for six or seven years now uh

so you know Jason you mentioned the Quorum protocol actually in 2017 we were I think the first people to implement zero knowledge proofs on an ethereum blockchain and we actually basically grafted the the zcash protocol onto quorum to show that you could have these privacy preserving transactions where you don't actually know the the amount that's being transacted or you know who the parties are um that was a POC that was difficult to progress for a number of reasons specifically around where zero knowledge proofs were at the time it was very very costly to generate them took a long time hard to write the circuits Etc um we actually did some work a few years later

um basically adopting the zither protocol or the zither paper that came out of Stanford and we implemented something called Anonymous ether which is more effective and a more efficient way it basically uses Bulletproof groups to prove privacy as well as you know maintain anonymity uh and that was actually highly um I think you know probably one of the pieces of work that we've done that was the most promising but had a very high demand in terms of you know skill set we just don't have the Deep you know very very large cryptography teams internally that you would need to put that out at scale so we've contributed that to the community that's like fully open sourced for people to go and build on

um and you know to answer the question we haven't seen anything just yet that can actually solve the problem very very open and willing to work with people in the community who are looking at those because it is you know obviously foundational for us but we just haven't seen anything that can you know operate robustly at scale just yet what's your perfect vision for how identity would work in crypto Tyron is it because I think the key is right having an identity on chain while preserving privacy which is much Tougher Than People realize so what's your vision for kind of the perfect solution that you'd love to see yeah I'm I'm a little bit biased towards uh and maybe maybe sort of uh too much though towards verifiable credentials uh

so verifiable credentials uh you know for those who don't know basically now a w3c recommendation um which basically means that the w3c as like you know the premier body for the internet uh standardization um is recommending to use verifiable credentials for identity you know claims Etc and basically they are a cryptographic proof of something about you or something about you know your organization that is irrefutable so if you tell me uh you know well if I tell you I work at JPMorgan and I present to you a credential that says I am a JPMorgan employee you can cryptographically prove that uh you know you don't have to rely on me it's all

embedded in the in the crypto you know private key signatures and so I think that verifiable credentials are very interesting um for a few reasons one they do maintain privacy right so when you're actually uh holding a credential that you need to present to someone else you're never really giving them that credential and you're never having to store it in some place that you know many people can access and that your data can sort of be put at risk through you know hacking or theft uh it's also technology agnostic so and and this is actually a really important point the the way I think that crypto becomes you know actually has the step change in terms of bigger adoption and broader usage is more integration in Into the

Web 2 world right more integration into today's world and this idea of identity and being able to sort of cross the boundaries you know I'm tired Lobby in the real world I also want to be tired love and improved like these are my crypto assets when I want to go and do something I don't want to have this sort of bifurcation um verifiable credentials have this nice property of being technology agnostic and so I could use my proof of my name or proof of my address when I'm logging into like I don't know my regular way bank account and I can also use it when I'm trying to prove that I am a reputable person in this D5 protocol and you know I'm good for the the amount of money that I'm going to be borrowing um so I think that something like

verifiable credentials is is important but you know the space is still emerging and there's quite a lot of research that's going on as well all right everyone wanted to talk about vouch again our favorite insurance provider for crypto companies if you are building in crypto you have probably come to realize that contracts need Insurance Partners demand insurance and as a Founder myself trust me when I say you owe it to not only yourself but your investors and your clients and your customers and I'm not just talking about any insurance there are exclusive coverages are tailored specifically for crypto companies that can address issues like protections for regulatory defense recognizing Dows as insured addressing smart contract vulnerabilities and even

covering the loss of digital assets they're in it with you whether you're working on l1s l2s Dows MPC wall providers building a protocol and a lot more so whether you're just scribbling your next big idea on a napkin or gearing up for a big fundraise or maybe thinking about that IPO or an acquisition don't leave things to chance get insured today with five percent off vouches exclusive coverage for Empire listeners using Code Empire think about it this way with vouch you're not just ensuring your startup you are investing in peace of mind yeah so a lot of what you're talking about are things that I think the front-end consumer won't see they'll see it maybe in the savings or they'll see

it in trade settling faster but they don't actually use it when you look at kind of what's Happening across the industry you know uh who is it Citadel I think Citadel Fidelity and Schwab are building that supposed crypto exchange you have I've heard of a couple of the biggest you know web 2 companies building their own wallets kind of like almost a fork of what feels like metamask have you guys thought about what a a front-facing crypto product from JP Morgan would look like yeah we've actually thought about that a lot because you know and I'll sort of frame this in the from the point of view that within Onyx we sort of have this freedom to go and try and work out like what that future looks like and even if that future can be somewhat disruptive to you know our existing businesses for example

um but the way that we've thought about you know this identity and sort of wallet space is actually that these things should already come together ultimately we think that you know if you could have a wallet that had both of your digital assets your you know personal assets like nfts whatever the case is as well as your identity credentials all in one you can actually start to get a much better you know usage of your value right the things that you care about the most in your life and so we actually built a prototype Mobile Wallet that really brings these things together uh you know brings together your nfts brings together your verifiable credentials brings together your digital assets um and and sort of showed how you could

do illustrative things like I don't know take out a loan where the credit score was based on the credentials that you had in your wallet and also the value of your crypto assets so you could you know basically reduce your loan to value in some sense um so that's not a product that we've actually taken to Market but it's a very sort of strong you know sort of indicator as how we think about these things coming together and I think that that's where it's going to go and actually in the last sort of year or so you've seen companies starting to put out you know digital wallets that are not just you know for crypto but also some identity aspects as well I'd love to zoom out and just get your take on

just as someone who works works on crypto but almost outside the industry what is your view of what's gone right and what's gone wrong right now and you know there are these big conversations happening in crypto l2s you know defy apps building their you know app chain thesis things like that would love to just get your kind of zoomed out view of what you're excited about what you think folks have gotten right what you think folks have gotten wrong yeah yeah and I mean you know weirdly although we sort of sit on the outside we do a lot of work in blockchain itself uh you know my whole team is you know writing smart contracts and dapps and you know building Key Management Solutions and so I feel like we we also come from a point of view of really understanding the

technology and that's right from the days when we built Quorum itself I I'm sort of like a little bit conflicted about the very very high focus on infrastructure um you know clearly there's been a long time focused on scalability building out you know all the L2 Solutions you know more recently things like uh you know PBS or Mev and how you can actually optimize you know that whole flow um more recently I think very healthy you know things like account of traction come in but I'm I'm sort of a little bit conflicted about is there too much focus on infrastructure and trying to do very cool technology things and not enough

focus on use cases and actually trying to like move the needle for people right like really just make things easier and I think that that's been a big Focus for us internally right we we have to generate Revenue ultimately we have to show value and that's not going to be through creating some really great you know technology solution that doesn't solve a problem and so we've had we've sort of enforced to to take the use case first approach what is the actual problem that we're solving how is this going to make things better for people and then look to see what technology we can actually use to enable that you know we spoke a little bit about this project guardian that we did last year we

actually ended up implementing um what people now call the smart account you know as part of account abstraction this was really before uh 4337 had come out um we created this contract on chain that basically represented JPMorgan and held the funds for JPMorgan but didn't give Traders direct access to it like we basically built in these rules that said you have to prove by submitting a verifiable credential that you are an authorized Trader and all of those rules and the the rules around like limit checks were built directly into the into the smart contract now that's called a smart account and people you know talk about account abstraction which obviously has been in you know in the works for many many years so

definitely not claiming that this is something that we created but the point is that we actually started with the problem of how do we simplify for our Traders is the ability to actually interact with these defy pools as opposed to like is there a cool technology thing that we can create and try and retrofit that so I think one thing is there's been a huge amount of innovation but sometimes I just wonder like is it overly focused and overly indexed on infrastructure but I also get y right I mean you have to have something at Scales you have to have something that can you know compete with the likes of the large processing like payments processing settlement networks um but I do think that we need to go more into use cases generally

um and then you know I mentioned some specific areas that I don't think there's been enough focus on privacy being the primary one at least from a traditional Financial Services perspective yeah how do you um I guess on the use case uh discussion this is especially common in Bear markets which is like why are you guys building this like where does it all matter I haven't seen it and I guess you can point to nfts and you can point to stuff like D5 and inclusion and access and whatnot but not really back it up with meaningful numbers in terms of users but an organization like JP Morgan you know largest bank in the world like you know you can roll this out and and you have the distribution you have the global

scale um when you think about you know you talked about the repo facility you talked about Guardian like maybe just give us one or two other examples of um of use cases that that may come you know within the two you know next next couple of years without giving the secret sauce but just an illustration of what it could be possible or we could be seeing uh down the road I mean obviously there's uh now a more renewed interest and perhaps line of sight into being being approval for Bitcoin ETF there's a ETF which is filed recently by Arc and 21 chairs um how do you guys think about that what what could you in the state of the world where we have ETFs like how

would you think about your client base uh being excited about that having access to that and you guys offering that in the plot yeah I actually I mean I have a sort of tangential answer which is and maybe Jason's goes back to a little bit about what you were asking in terms of you know what has the crypto industry done right and done wrong I don't think the crypto industry has done itself any favors around creating confidence with um you know large institutions specifically obviously through the recent um FTX debacle and that obviously as as we all know has nothing to do with the technology entirely everything to do with just governance and organize and you know how companies are structured and compliance around them but you know when you look

at the the very unfortunate thing was it was you know Alameda and FTX effectively were these poster child companies I think that it's going to take some time for Regulators to get comfortable again um not that they were ever fully comfortable but you know I know that progress um yeah so Regulators need to you know get there and large financial institutions need to get there need to be okay with allocating Capital obviously there are institutions today that are allocating to crypto but it's it's small right and I think some of these sort of like foundational things need to be improved before people feel

comfortable so I think the ETF is wrapped up in in a lot of that um will it will it happen you know who's who's to know really it feels like maybe uh you know given everything that's happened more recently but equally nothing is guaranteed um our focus is you know not so much around crypto investing it's more around how can we create these new products leveraging blockchain yeah I mean I I guess like on this point um of Regulation not to get too much into the weeds but I do think you know from your Vantage Point you understand how a back works and the different segregation within a bank and when you're managing clients money like there's very clear who's a custodian and who's the broker D like there's a very

clear system within Finance to to precisely prevent a thing like FTX happening so I gotta wonder I mean there there's some very sophisticated investors that looked at the deal maybe gloss over the structure and the relationship between something like Almeda and FDX but I mean gosh like you almost got to think if you're looking at something like that and I did back in the day and that was a red flag for me this this Alameda FTX relationship because I mean I was vaping more and you understand there's walls and there's processes procedures in place but it wasn't there was much there so I'm curious like I don't know if you look the deal or not but if you like that's to me not a crypto problem it's just like a lack of due diligence that by the way is not only inherent in

crypto I mean there's terrible deals that have been done in a record low and straight environment because people are lazy you know it's free money and so they just play around with it and slash around and it's not theirs right so I'm curious um not to be a defense but you know hey you guys looked at that deal and had you looked at the deal I mean clearly like this custodian ship and uh there ought to be clear rules and regulations within crypto for service providers so uh yeah yeah I mean you know the deal aside you know I don't think that was something that was ever on the table for us but we have been for a long time um sort of advocating for these clear roles and responsibilities right and the need for this

um this was well before you know anything surfaced on FTX it's just it's just because the market infrastructure exists today for a reason um and it is around protection and it is around engineering segregation of roles and responsibilities where we think the the real impact is is simplifying how those different structures can communicate and that's where blockchain makes sense right it's like having the shared Ledger you can still have separate roles and responsibilities um but you can actually come to a decision and conclusion around like ownership transfer in a much more efficient way okay I mean I I when I uh a lot of my prior friends at you in the industry or JP Morgan my alma mater like

when they ever reached out and I said hey well imagine the world where you can very quickly understand who your counterparty is and you can measure risk you can see transactions happening um and wouldn't it be nice wouldn't it be nice to minimize counterparty risk would it be nice to like be able to you know operate 24 7 365 and anatomically settle and and with if then statements like as you write them in Excel or from python or whatever right and they're like yeah that'll be great and but as soon as I said crypto like no no no no you know what like uh you lost me there but you know and then but you see blockchain not Krypton they're like they get re-engaged again um so yeah I mean I think um you know as a bank you you constantly think about

counterparty risk um but you know the issues around privacy are key right yep so um I guess uh all this rambled to think about like within within JP Morgan like the buy-in within the organization has that remained steady over the years is do you think that it has you know now given the recent events with FTX uh we're just that the industry is kind of in a bear Market or you know the economy or whatever has interest waned within the organization like is the buying still strong how is how does your group and and its role within the bank like have evolved over time and where do you see it kind of over the next couple years yeah I would say that the buy-in

for the potential that this Tech has has increased over the past few years um not even maintained it's increased and that's because we've got more confident on how to deploy it how to implement it how to actually go live you know we're not talking about Pilots we're talking about BAU products that are fully integrated into our regular banking systems we have blockchain connected to our core infrastructure um and we have a good understanding of you know what makes a good use case so I think with that lens we're we're confident that you know we're just going to carry on there is obviously the unfortunate you know noise around the more recent crypto bear Market um but you know that's going to come and

go like that's that's always going to happen we just want to make sure that we're we're really generating value for for our clients and for JP Morgan Byron I think last thing to wrap this up I know you guys have this hackathon coming up that you want to talk about you've got you know lens and layer zero ZK sync magic it's not I'm not used to seeing you know ZK sync magic layer zero and lens and then JP Morgan's name next to it right so maybe we can wrap this up by just talking about that hackathon and really what you're looking for here yeah I mean so the the participants that we have that's um so ZK sank by economy um magic as you said lens protocol um you know I think really some of the strongest web3 names coming together uh JPMorgan there's another Lodge payment

company that's going to be announced uh hopefully next week um really the idea here is you know we think that digital identity is one of the core pieces of this new world right this idea of having more control over your own data having more control over your own identity you know we spoke about the fact that you want to be able to prove who you are without revealing you know everything about yourself um it's very easy in the real world for you know you and I to walk into a room and people are not questioning that like I'm the real Tyrant I mean obviously I am life but when you're online you lose all of that certainty how do we know you're not like a deep fake unless you have cryptographic videos yeah maybe maybe next year

um but exactly that right like online you lose all of that ability to trust and so we think that um you know the the Crux for bringing web 2 and web3 together lies in identity being able to bring your your you know actual self into the sort of crypto World um and being able to utilize your crypto assets in the web to in the web 2 kind of space as well and so what we wanted to do and we've been working on you know digital identity solutions for a long time is try and do this in a more sort of formal way through this hackathon uh we've actually open sourced the identity infrastructure that we've created or at least you know a part of it and we want

people to come up with cool use cases like show us how verifiable credentials can actually like um you know easier to access some under collateralized protocol and you know provably show that you have the credentials to actually borrow from you know someone else without revealing who you are or on board in a much easier way again in a privacy Centric way um there's so many areas where identity is just at the core of what we do in our day-to-day lives but it's a deliberately missing piece from crypto right but I think that more and more so that's going to have to change you know we are already seeing kyc requirements AML requirements for some of the you know

protocols that are tokenizing real world assets uh quote unquote because they want institutional investors and they want institutional uh sort of adoption so I think there's this huge space that can be created and we would love to facilitate that and that's really what the hackathon is about so I'm sure we'll be able to post the link to to it you know we're going to be kicking off on September 12th uh so right in the middle of permissions list next week uh runs for a month online there's about seventy thousand dollars worth of uh you know prizes to be won uh and really it's it's just centered on combining these really great web 3 protocols uh with you know strong digital identity Concepts and

Tech technology to show how we can actually create this new layer of trust yeah awesome that's fast I think we'd all agree that uh digital identity is super important so it's great to see you guys spearheading that and coordinating with a lot of the top projects in the space any parting thoughts Tyrone uh it's been a great pleasure to have you um you know always good to have a former JP Morgan uh uh friend on the Pod uh anything anything else you want to leave the audience with uh otherwise it's been a great discussion yeah no just you know from our perspective um these bear and bull markets come and go but um I think that what we're hopefully showing is there is real use for this technology and uh you know we have a huge Focus internally and

um I hope that you know especially through something like the hackathon we can show how the the traditional Finance world and the sort of new web 3 world can come together in a really productive way so thanks to both of you for um for inviting me on always great chatting and yeah looking forward to seeing you next week in person that permissionless see you next time thanks Tom all right folks [Music]