JPMorgan Chase & Co Leaves R3 Consortium
The fintech-focused R3 consortium of banks has lost another big-name member: JPMorgan Chase & Co. Joining a line of major banks that have already grabbed their hats and headed for the door, JPMorgan allegedly found its goals to be inconsistent with R3’s technological direction. According to Charley Cooper, a managing director at R3, “JPMorgan parted ways with R3 to pursue a very distinct technology path which is at odds with the one chosen by the global financial services industry, represented by our 80-plus members.”
That membership pool has been slowly draining for the past few months. Around the end of November 2016, several announcements were made regarding Goldman Sachs, Morgan Stanley, Banco Santander, and National Australian Bank leaving R3.
While R3 has embraced distributed ledger technology (DLT) it has designed its Corda DLT to function without a traditional blockchain, and has explicitly stated, “we are not building a blockchain.” A distributed ledger can function without a blockchain but it loses certain features that many claim make for a more robust, secure network. Using a blockchain-based system generally means all participants on that network have access to the distributed ledger.
Aside from issues stemming from differences in how they approach solving technological challenges in the finance industry, there was allegedly contention regarding the number of members in the consortium, the differing goals of the members, and the level of control and direction in R3. It’s understandable that a major bank would like a fair amount of control regarding the direction of R&D it is paying for. R3 finances the development of its technologies by raising funds from its members. The consortium is currently looking to raise $150 million from its members, in return for a 60 percent stake in the venture. It seems there may be too many competing agendas in R3 for the consortium to satisfy all its members, thus prompting the exodus
JPMorgan hasn’t commented on its R3 departure but it may be due to the fact that JPM is specifically exploring blockchain technology. JPMorgan has already invested in blockchain tech startups like Axoni and Digital Asset Holdings, and the bank is a member of the Enterprise Ethereum Alliance. JPMorgan Chase & Co seems committed to backing the blockchain horse.