JP Morgan Chase Report: Encrypting currency will help diversify the portfolio

nBuzz Rating: A recent JP Morgan report launches a series of discussions on cryptocurrencies and blockchain, focusing on their impact on key market players such as investors, financial companies and the central bank. The authors of the report believe cryptocurrencies have a huge role to play in the financial sector in the future, such as diversifying their portfolios. Of course, there are still many problems in the development of this new thing, and its advantages need to be solved only after these problems are solved.n
nTranslation: Inan
Analysts at JPMorgan Chase wrote in a new 71-page cryptocurrency survey that cryptocurrencies could help investors diversify their equity and debt portfolios in the future.n
The report, titled “Decryption of Cryptocurrencies: Technology, Applications and Challenges,” was released on February 9 by JPMorgan’s Global Research Unit. According to a copy of the paper from CoinDesk, the report explores a series of topics related to cryptocurrencies and blockchain, in particular the impact of this technology on investors, financial companies, central banks and others.n
The most noteworthy part of the report may be that although cautious, it predicts that cryptocurrencies may one day play a role in diversifying global bond and equity portfolios. The report states:n
n”Cryptocurrencies could play a role in the diversification of global bond and equity portfolios if previous yields, volatility and correlation persist, and in this regard, given its huge returns and volatility over the past few years The effect is great. “n
nn”If, after a few years, cryptocurrencies still exist and remain a part of the global market, they may get out of the current speculative phase and then have more normal returns, volatility (lower) and relevance (more like other Zero return on assets such as gold and yen). “n
nThis argument may be in stark contrast to previous comments by Jamie Dimon, the bank’s president and chief executive. Because Dimon publicly stated Bitcoin as “fraud” last year, the author of the report pointed out that cryptocurrencies “are unlikely to disappear completely.”n
They wrote: “Cryptocurrencies are unlikely to disappear completely and may easily come in different forms for users who crave stronger decentralization, peer-to-peer networking and anonymity.”n
Blockchain benefitsn
The report reviews the investment situation and examines the broader issues surrounding the use of the blockchain, especially those private companies that want to maintain their own “permission” chains.n
The writer wrote that the blockchain is a “superior database,” and although regulators are concerned about it, the technology itself may be “supportive of regulation.”n
The report said: “We believe that the biggest attraction of the blockchain lies in providing efficiency gains for the entire value chain.”n
n”The proposed use case of distributed ledgers in the financial arena is likely to limit access strictly based on pre-established known participants and the writing of the appropriate KYC / AML files, so we think it is possible for distributed ledger technology Provide regulators with greater transparency, flexibility and shorter lead time to reduce counterparties and market risk. “n
nAt the same time, these authors also believe that the blockchain could overturn the areas of cross-border payments, settlement / clearing / collateral management and the broader TMT, transportation and healthcare. The report emphasizes that people can see the benefits of using this technology only when cost-effectiveness neutralizes regulatory, technical and security barriers.n
About the central bank to encrypt moneyn
The report also explored the issue of central banks creating cryptocurrencies (or digital currencies).n
While Fed officials generally base their opinions on “not considering it for the time being” (as opposed to other central banks actively researching the application), JP Morgan’s report still explores the possible implications and consequences of such issuance.n
The authors of the report argue that, in a sense, state-owned cryptocurrencies can support “payment services provided by the central bank” in a cashless system, and some economists see this as helping banks to impose negative interest rates.n
However, they also pointed out that the issuance of such currency “would expose non-bank institutions to the Fed’s balance sheet,” which in turn “would endanger the commercial and financial intermediation function of the commercial bank which is important in economy and society.”n
At the same time, the author states that the cryptocurrency issued by the state could affect the extension of credit to the private sector as it would undermine some of the Reserve Bank operations.n
n”If cryptocurrencies are considered to be better than bank deposits, driving large-scale transfers to cryptocurrencies, most of the savings will flow into central banks rather than commercial banks and may therefore significantly increase the private credit risk premium and reduce the credit flow to the private sector The flow. “n
nThe report also attempts to address the anonymity of state-owned cryptocurrencies.n
The writer states: “On the one hand, privacy has been seen as an implicit constitutional right and may extend into currency transactions; on the other hand, there are laws designed to prevent the financial system from being used for such activities as money laundering or terrorist financing. “n

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