Public blockchain ledgers ‘not fit for purpose’, says JPMorgan exec

According to JPMorgan's predecessor, public blocks are still insufficient to execute large-scale transactions.

Speaking at the BIS Innovation Summit on May 7, Umar Farooq, CEO of JPMorgan's Onyx blockchain-based payments platform, said:

“I think you need something [a Unified Ledger]. I mean it really is a must because if you watch it. […] Public blockchain ledgers are not suitable for the purpose of large transactions today.

The CEO's comments were in response to the Unified Ledger, introduced by the Bank of International Settlements (BIS) last year, which aims to support central bank cash flows, tokenized deposits and digital assets on the network.

Farooq explained that public blockchain validators cannot be held responsible if a $100 million transaction fails. Farooq said:

“Who am I to accuse? […] You have to get to a point where people can make trusted transactions between financial institutions with the same accountability in the system.

Despite the CEO's criticism, the JPMorgan bank-led Onyx platform has been built as a private, permissioned version of Ethereum, the world's second-largest public blockchain network. Unlike public blockchains, Onyx's permissioned chain allows institutions to modify transactions.

Moreover, JPMorgan's Farooq argued that cryptocurrencies that are issued on public blockchains create false incentives aimed at driving more users to the networks to drive up the coin's value. He also stressed that blockchain should be considered a public good, just like the Internet.

“We need to reach an evolutionary point where technology starts to be seen as a public good and a means of empowerment.”

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TradFi firms prefer public blockchain, says ex-Graycal executive

Despite widespread criticism, traditional financial institutions (TradFi) prefer to tokenize assets on public blockchains.

Speaking to Cointelegraph, Celissa Morin, who served as the vice president of platform distribution at Grayscale until mid-2022, said that BlackRock's latest initiative could lead to more TradFi institutions placing assets on public blockchains instead of private ones. She said:

“I think we'll see a preference for private chains with JPMorgan Onyx. But I think this narrative was a few years ago. Now, I think this is a very public blockchain.

Morin was referring to BlackRock's $100 million token “BUIDL” fund, which launched on the Ethereum network on March 18.

BlackRock's BUIDL fund currently holds more than $382 million and is the world's largest tokenization fund, according to Dune data.

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