JPMorgan's blockchain unit CEO says consumer protection needs to be a priority in digital asset projects

SINGAPORE — Banks person to prioritize user extortion arsenic they embark connected integer plus experiments, said Umar Farooq, main enforcement serviceman of JPMorgan's blockchain portion Onyx.

Many blockchain projects and different crypto protocols person the imaginable to marque fiscal services much efficient, accessible and affordable. But without due precautions, they could besides exposure customers to cybersecurity risks.

In caller months, galore crypto investors person been struck by hacks and scams. For example, crypto speech Binance was deed by a $570 cardinal hack successful October and Deribit mislaid $28 cardinal successful a blistery wallet hack this month.

"What a slope needs to bash from a regulatory constituent of presumption and customer's constituent of presumption is that we request to support our customers. We cannot suffer their money," Farooq said during a sheet astatine the Singapore Fintech Festival 2022 connected Wedneday.

"I bash deliberation you request immoderate benignant of individuality solution oregon know-your-customer solution which verifies who the quality being that is interacting is and what they are allowed to do. Because without that, successful the longer term, it conscionable doesn't work," helium added.

Farooq explained that JPMorgan is utilizing a solution called verifiable credentials that unrecorded successful the customer's blockchain wallet. When the lawsuit goes to a protocol to trade, the protocol validates the credential.

"I can't foresee radical being capable to nonstop wealth crossed borders if nary 1 checks and nary 1 knows who's sending wealth to who, due to the fact that sooner oregon aboriginal they volition beryllium successful a wealth laundering incident," said Farooq. 

"So those are the precise cardinal things that request to beryllium addressed earlier you adjacent get to systematic issues. Education, extortion and individuality request to beryllium successful place," helium added. 

Farooq and Onyx tackled immoderate of these information and verification issues arsenic portion of Project Guardian, an manufacture aviator the Monetary Authority of Singapore announced successful May.

"It was very, precise hard," Farooq said.

In the pilot, DBS Bank, JPMorgan and SBI Digital Asset Holdings conducted transactions successful tokenized overseas speech and authorities bonds. Tokenizing a fiscal plus involves converting its ownership rights into integer tokens. It allows fiscal transactions specified arsenic borrowing and lending to beryllium performed autonomously connected a blockchain without the request for intermediaries.

"It was the archetypal clip we had tokenized deposits. I really deliberation it's the archetypal clip immoderate slope successful the satellite has tokenized wallets connected a nationalist blockchain," Farooq told CNBC successful an interview.

"Using nationalist blockchain, we had to walk a batch of clip reasoning done identity. We did tons of audits of astute contracts due to the fact that again — they were publically visible. And finally, it was utilizing a protocol to really marque it each happen. It's a batch of managing the risks. All of these were firsts for us," helium said.