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JPMorgan and 6 Indian Banks Pilot Blockchain Interbank Dollar Settlement Platform

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JPMorgan Chase and Co., the American multinational financial giant, has collaborated with six Indian banks to introduce a blockchain-based platform for settling interbank dollar transactions. 

JPMorgan Chase Launches Blockchain Platform for Interbank Dollar Transactions in India

This initiative strengthens New Delhi’s efforts to establish the Gujarat International Finance Tec-City (GIFT City) as a formidable competitor to prominent global financial centers like Singapore, Hong Kong, Abu Dhabi Global Market (ADGM), and Dubai’s IFC. 

In an interview, Kaustubh Kulkarni, a senior country officer in India and vice chairman of Asia Pacific at JPMorgan, revealed that the company would conduct a pilot project over the next few months to assess the banks’ experience. This initiative involves participating banks such as HDFC Bank Ltd., ICICI Bank Ltd., Axis Bank Ltd., Yes Bank Ltd., IndusInd Bank Ltd., and JPMorgan’s banking unit at GIFT City.

The objective of the banking giant is to leverage blockchain technology to achieve faster and more efficient interbank dollar transactions. Currently, transactions take several hours to settle when utilizing the existing settlement systems. However, implementing blockchain can complete these transactions almost instantaneously.

JPMorgan plans to utilize blockchain technology for facilitating transactions on a 24/7 basis, enabling GIFT City banks to support their time zone and operating hours, as revealed by Kulkarni. The International Financial Services Center Authority has approved the pilot project, which will launch on Monday.

JPMorgan’s blockchain platform Onyx, designed for wholesale payment transactions, will be utilized for this initiative. In addition to JPMorgan, several international systemic banks, including Deutsche Bank and MUFG, have also established a presence in GIFT City.

JPMorgan Identifies Unfolding Signs of De-dollarisation

 Blockchain Interbank Dollar Settlement Platform

Strategists at the biggest U.S. bank, JPMorgan, say that signs of de-dollarisation are unfolding in the global economy. However, they believe the currency will maintain its long-held dominance for the foreseeable future.

The BRIC nations are being driven to challenge the dollar’s hegemony. This is due to the impact of steep U.S. interest rate rises and the utilization of sanctions that have frozen the likes of Russia out of the global banking system.

Meera Chandan and Octavia Popescu, strategists at JPMorgan, highlighted that the usage of the dollar in the global economy remains within its historical range but has become more “bifurcated under the hood.”

Traded currency volumes indicate that the dollar’s share is close to reaching record highs, standing at 88%, while the euro’s share has decreased by 8 percentage points over the past decade, reaching a record low of 31%. On the other hand, the Chinese yuan’s share has reached a record high of 7%.

The strategists stated that de-dollarisation is evident in foreign exchange reserves, with the dollar’s share reaching a record low as its share in exports declines. However, they noted that de-dollarisation is still emerging in the commodities market.

Dollar’s Declining Dominance: JPMorgan Flags Record-Low U.S. Exports

JPMorgan’s assessment of the de-dollarisation trend is the most prominent among major U.S. banks. However, influential asset managers like Goldman Sachs Asset Management have also expressed their views.

In its note on Monday, JPMorgan estimated that the U.S. share of global exports had reached a record low of 9%. This is against China’s share which reached a record high of 13%.

When considering global central bank foreign exchange (FX) reserves, the dollar’s share has dropped to a record low of 58%, although it remains the most significant globally. However, when accounting for gold reserves, the dollar’s share in FX reserves decreases further, as gold now comprises 15% of reserves compared to 11% five years ago.

According to JPMorgan the progress in internationalizing the Chinese yuan (CNY) had been limited, primarily due to the country’s capital controls. They anticipate little change in this regard. According to JPMorgan’s analysts, the yuan (CNY) accounts for 2.3% of SWIFT payments, while the dollar represents 43% and the euro represents 32%.

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