Digital Asset has a talented team and technology that is uniquely positioned to solve challenging settlement issues facing global financial institutions.
You have to abide by the regulations that the regulators insist on. This is not a philosophical divide - it's a fact of life.
I had seen the financial crisis unfold, and I had seen the credit derivatives market get operationally ahead of itself, which resulted in systemic risk counterparty exposures. I began to believe that distributed ledgers had the capability to tackle that problem.
Unfortunately, tools that transfer risk can also increase systemic risk if major counterparties fail to manage their own risk exposures properly.
I spent my whole career thinking about risk, markets, infrastructure, and regulation. I had seen the financial crisis unfold, and I had seen the credit derivatives market get operationally ahead of itself, which resulted in systemic risk counterparty exposures. I began to believe that distributed ledgers had the capability to tackle that problem.
We all want a non-fragmented solution, but the utopian version of a single blockchain to rule them all is undesirable and impractical.
It was amazing feeling to be able to be involved in invention, but not just invention - the creating of a marketplace that had real value to add.
I have a quantitative background, but really, derivatives appealed to me because they require so much creativity.
Blockchain technology represents a generational opportunity to mutualize database infrastructure across entities within financial services. What that translates into is an enormous cost-saving, risk-reducing, and capital-enhancing opportunity.
Digital Asset has a revolutionary technology platform that eliminates the counterparty risk and lack of transparency that has hindered mainstream adoption of cryptographic technology.
When asked to explain this space, I often ask people to forget pretty much everything you've heard about blockchains, crypto-currencies, and bitcoin, and instead dumb it down a lot and think about something no more complex or intimidating than good old-fashioned database technology.
Just being able to trade financial commodities is a serious limitation because financial commodities represent only a tiny fraction of the reality of the real commodity exposure picture. We need to be active in the underlying physical commodity markets in order to understand and make prices.
The credit derivative market would never have evolved but for the preexistence of the derivative markets because so much of the technology was borrowed.
Distributed ledger technology is fashionable. In fact, if you could wear it, you'd put Ralph Lauren out of business, at least in my case.
I think the most important thing to understand about credit derivatives and their use at JPMorgan is they served a number of different purposes. First and foremost, they were a tool which initially was seen as being useful in managing the bank's own risk management challenges.
A credit derivative, at its core, is actually a very simple concept... The simplest way to think of a credit derivative is it is analogous to insurance against the risk of a credit default by your counterparty, your business counterpart.
With private chains, you can have a completely known universe of transaction processors. That appeals to financial institutions that are wary of the bitcoin blockchain.