JPMorgan Chase has filed a patent application on systems and methods that use blockchain technology to make cross-border payments.
The patent describes various ways to route payments on a distributed ledger network and commends the speed, security and efficiency of blockchain.
“Distributed ledgers, such as blockchain, provide a unique system for recording transactions and storing data. In general, distributed ledgers hold a log of transactions (events) that may be replicated across a public or private distributed network. Cryptography and digital signatures may be used to determine valid parties and transactions such that all parties/observers agree on the order and state of the ledger in real-time without having to rely on a trusted third party to hold the true ‘golden copy.’ The distributed ledger thus provides a practically immutable, verifiably true audit trail.”
The patent also criticizes the traditional ways in which banks move money around the globe, calling the status quo slow and expensive.
“For a cross-border payment to be made from a payment organization to a payment beneficiary, a number of messages must be sent between the banks and clearing houses involved in processing the transaction. This often results in a slow transaction, as there may be delays in service due to correspondent banking, messaging networks, and clearing intermediaries in the payment flow.
The transaction may also be expensive, as there are duplicative reconciliation and reporting costs across participants and within banks to enable transparency and payment tracking. There is a restricted availability to the funds, as real-time settlement of payments is not possible. And, the transactions may be risky as there are counterparty and settlement risks associated with correspondent banking network.”
The patent is called “Systems and methods for the application of distributed ledgers for network payments as financial exchange settlement and reconciliation.” The application was initially filed in October 2017 and was officially published on Thursday, May 3, 2018.
It describes a number of ways to use distributed ledgers to make digital payments, including:
- A payment originator initiating a payment instruction to a payment beneficiary
- A payment originator bank posting and committing the payment instruction to a distributed ledger on a peer-to-peer network
- The payment beneficiary bank posting and committing the payment instruction to the distributed ledger on a peer-to-peer network
- The payment originator bank validating and processing the payment through a payment originator bank internal system and debiting an originator account
The patent also includes a “processing machine” designed to provide the computing backbone to process transactions on the ledger.
That machine could come in many forms, including a microcomputer, mini-computer or mainframe, a programmed microprocessor, a micro-controller, a peripheral integrated circuit element, a CSIC (Customer Specific Integrated Circuit), ASIC (Application Specific Integrated Circuit)” and more.
Bitcoin was the first major blockchain innovation. JPMorgan Chase CEO Jamie Dimon famously called Bitcoin a “fraud” last year. He later praised blockchain technology and told CNBC, “I could care less about Bitcoin. I don’t know why I said anything about it.”
Meanwhile, JPMorgan Chase was recently hit with a lawsuit accusing the bank of deceptive tactics to collect high credit card fees for cryptocurrency purchases.
In another sign that blockchain and cryptocurrencies are gaining ground among big money, Goldman Sachs just announced it’s starting a crypto trading desk. That move is expected to happen in the next few weeks.
Image via Ben Sutherland/Flickr
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