Pang Huadong, the former vice president of US investment bank JPMorgan Chase, has revealed during an interview with the China Economic Times, how blockchain technology might prevent the economy from the next global financial crisis.
The infamous 2008 financial crisis might not be fresh on people’s mind, but Huadong was able to share the experience at JPMorgan during the meltdown of 2008 financial crisis. “In June 2007,” he said; “After graduating from the Massachusetts Institute of Technology (MIT), I worked in JP Morgan Chase’s Investment Fixed Income Financing department. At the time, 13 people managed JP Morgan’s more than $40 billion. When the 2008 financial crisis was the worst. The average daily loss is 300 million US dollars.”
Huadong notably added:
“It is only gradually understood that blockchain technology may be the key to avoiding the next world-class financial crisis.”
The 2008 Financial Crisis and the Power of Blockchain
In 2008, the world saw the biggest bankruptcy scandal it had ever seen. This was when the Lehman Brothers filed bankruptcy. Having USD 639 billion in assets and USD 619 billion in debt, Lehman’s bankruptcy filing was the largest in history. Of course, availability of transaction records of Lehman brothers would have made clever data mining, using efficient machine learning tools, to be possible as loopholes and anomalies would have been discovered, and countermeasures would have been taken.
Needless to say, the capital markets would have easily and earlier identified Lehman’s falling worth, evaluated and re-priced Lehman CDS risk, and subsequently acted as a natural brake on Lehman expanding its business.
Yet, despite the Lehman case being the biggest and most tracked bankruptcy in the world, it is yet to be resolved after ten years after its crisis. However, with Blockchain technology, bankruptcy would become history since corrective action could be taken before a firm gets bankrupt.
What Blockchain Offers
According to Pang Huadong, Blockchain is beneficial to stakeholders who minimize associated financial risks. He said:
“The blockchain is essentially a technology that can be de-mediated or weakly intermediated. Therefore, blockchain technology can build trust mechanisms at the lowest cost.”
According to IBM infographics, IBM Global Financing reduced time spent resolving financial disputes by a whopping 75% using blockchain technology. Thus, with blockchain, participants in the transaction can share a common single platform with secure access and have pinpoint delays and errors easily as problems are fixed quickly without even filing a dispute.
Pang Huadong is presently a partner and CFO of Digital Moment Technology (Beijing) and also the honorary academic advisor of the Asian Blockchain Institute. Known for his precocious intellectual prowess as a young student, he jumped several years of school and was recruited to MIT where he was awarded the Dean’s scholarship. He has served as the vice president for JP Morgan Investment Bank whose CEO, Jamie Dimon, is known for calling Bitcoin a ‘fraud.’ Dimon, however, reversed his statement in January 2018.
It is also beneficial to stakeholders, who minimize Pang Huadong is currently a partner and CFO of Digital Moment Technology (Beijing) and the honorary academic advisor of the Asian Blockchain Institute. Huadong has a remarkable, truly inspirational biography. Born and raised in a rural village in Shandong, China, he quickly earned a reputation of a genius boy, jumped several years of school, and was admitted to the China University of Science and Technology in the age of 14. Huadong majored in mathematics and won the first place in the university competition.
After five years of study, Huadong was recruited to MIT, where he was awarded the Dean’s Scholarship and pursued a Ph.D. in probability theory.
JPMorgan has been known in the crypto community for vocal skepticism towards Bitcoin and cryptocurrencies coming from the company’s CEO, Jamie Dimon.
In September 2017 Dimon called Bitcoin ‘a fraud’ and said he would fire any employee trading Bitcoin on the company’s accounts. Later, in January 2018, he reversed his original comments about the virtual currency and is also testing its Quorum Blockchain Platform for debt issuance.