In Singapore, When experimenting with digital assets, banks must put the safety of their customers first, according to Umar Farooq, CEO of JPMorgan’s blockchain business Onyx.
Numerous blockchain initiatives and other cryptographic protocols have the potential to increase the effectiveness, availability, and affordability of financial services. But if necessary safeguards aren’t taken, they can expose clients to cybersecurity dangers.
Many cryptocurrency investors have fallen victim to scams and hacks in recent months. For instance, the cryptocurrency exchange Binance suffered a $570 million attack in October, and Deribit lost $28 million this month due to a hot wallet hack.
We must safeguard our customers, which is what a bank is required to do under both regulatory and customer requirements. During a panel discussion at the Singapore Fintech Festival 2022 on Wednesday, Farooq remarked, “We cannot loose their money.
Because without that, it simply doesn’t function over the long haul, he continued in an interview with CNBC.
According to Farooq, JPMorgan uses verifiable credentials, which are stored in the customer’s blockchain wallet. The protocol verifies the credential when a customer uses it to transact.
If no one checks and no one knows who is donating money to whom, I can’t imagine people being able to move money across borders, said Farooq. They will eventually become involved in a money laundering issue.
These are the fundamental issues that must be addressed before you can even think about systematic issues. It’s important to have identity, protection, and education in place, he continued.
Pilot for Project Guardian in industry
As part of Project Guardian, an industry trial that the Monetary Authority of Singapore announced in May, Farooq and Onyx addressed some of these security and verification challenges.
In the pilot, government bonds and tokenized foreign exchange were traded by DBS Bank, JPMorgan, and SBI Digital Asset Holdings. When a financial asset is tokenized, ownership rights are converted into digital tokens. It makes it possible for financial operations like borrowing and lending to be carried out automatically on a blockchain without the use of middlemen.
“We have never tokenized deposits before. In an interview with CNBC, Farooq stated, “I genuinely believe it’s the first time any bank in the world has tokenized wallets on a public blockchain.
We have to spend a lot of work considering identity when using public blockchain. We performed numerous audits of smart contracts because, as I said, they were open to the public. Finally, a procedure was being used to actually make it all happen. It takes a lot of risk management. For us, each of them was a first,” he said.