According to "DL News", Umar Farooq, CEO of Onyx, an asset tokenization platform owned by J.P. Morgan, believes that public ledgers (Public Ledger) such as Ethereum or Bitcoin are currently " Not suitable for large transactions.

"What if something goes wrong? Who should I sue?" Farooq said on Monday (6th) at the Bank for International Settlements Innovation Summit in Basel, Switzerland: "You can trust the code as much as you want, but there is no code court."

Ethereum and other public blockchains support millions of transactions every day, but these blockchains are not secure enough for high-value transactions between banks and financial institutions, Farooq said. He believes that a platform must allow people to conduct trustworthy transactions between financial institutions, and there must be some accountability in the system.

.@ddisparte making a strong case for the co-existence and convergence of private and public forms of money and payments at the @BIS_org innovation summit pic.twitter.com/jszND23kBV

— Patrick Hansen (@paddi_hansen) May 6, 2024

joint ledger

The Bank for International Settlements (BIS) advocates the establishment of a "new type of financial market infrastructure" called a Unified Ledger to connect central bank digital currency (CBDC), digital assets and tokenized bank deposits . Farooq said so-called federated ledgers that connect the platforms of central banks and other large financial institutions will be almost necessary to process transactions worth millions or billions of dollars.

Farooq’s concerns come at a time when many Wall Street giants are flocking to crypto-assets, governments are vying to issue CBDC, and financial institutions are vying for a share of the growing tokenization of financial assets in the hope of reshaping the financial system. But without mutual interaction, Operations, the global ecosystem and its liquidity may become disconnected. Farooq believes that the federated ledger "should become the global layer for the world's financial flows."

Tokenization refers to the process of converting physical assets into blockchain digital tokens. JPMorgan’s Onyx speeds up short-term lending transactions by tokenizing cash and collateral using smart contracts. In October last year, senior JPMorgan Chase personnel revealed in an interview that JPMorgan Chase had transferred US$1 billion in funds for many large companies every day through JPM Coin.

geopolitical challenges

However, joint ledgers and other similar concepts may not take into account the obstacles posed by international relationships and conflicts. “The discussion of a unified ledger almost completely ignores geopolitics,” Dante Disparte, chief strategist and head of global policy at Circle, the issuer of the U.S. dollar stablecoin USDC, said at the same conference.

Disparte said:

"People will not weaponize currency, but weaponize the trajectory of currency."

For example: After the Russian-Ukrainian conflict broke out in 2022, the European Union banned several Russian banks from using the international bank payment network Swift. “The geopolitical realities of this cross-border payments integration often extend beyond national security interests, and that’s the unfortunate part of the problem,” Disparate said.

International research on joint ledgers is still ongoing. Last month, the Bank for International Settlements’ Innovation Center and seven central banks announced an initiative called “Project Agorá”, which plans to work with the private sector to explore how tokenization can enhance the operation of the monetary system. Project Agorá builds on the federated ledger concept and investigates how to seamlessly integrate tokenized commercial bank deposits with tokenized wholesale central bank money in a public-private programmable core financial platform.

In November last year, the Monetary Authority of Singapore (MAS) announced in a statement that the authority was working with international policymakers and financial institutions including Bank of New York Mellon, DBS, JPMorgan Chase and Mitsubishi UFJ Financial Group , exploring the design of an open digital infrastructure for hosting tokenized financial assets and applications. The new initiative, called “Global Layer One” (GL1), will facilitate seamless cross-border transactions and enable tokenized assets to be traded in global liquidity pools while meeting relevant regulatory requirements and guidelines.

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