The multinational investment bank JPMorgan Chase & Co is testing the use of its own private blockchain for collateral settlement.
According to Bloomberg, JPMorgan conducted a pilot transaction on May 20, in which two of its entities transferred a tokenized representation of shares of Black Rock Inc money market funds..
A money market fund is a type of mutual fund that is considered a low-risk investment, as it offers exposure to short-term, liquid assets.such as cash, cash equivalents and highly rated debt securities.
As for JPMorgan’s broader vision for its private blockchain, the bank said it intends to allow investors to put up a wide range of assets as collateral that can also be used outside of regular market hours.. He singled out equities and fixed income in particular.
“What we have achieved is the frictionless transfer of collateral instantly,” said JPMorgan Global Head of Trading Services Ben Challice.. BlackRock was not a counterparty, but has been heavily involved in the initiative “from day one and is exploring the use of this technology.”
JPMorgan has been active in cryptocurrency and blockchain technology for quite some time, and also founded Onyx Digital Assets (ODA) in late 2020.. The project is described as a “blockchain-based network that enables the processing, registration, and Delivery-versus-Payment (DVP) exchange of digital assets across all asset classes.”
Although it has not been specifically outlined whether JPMorgan used ODA in this case, the network is set up to exchange cash for different types of tokenized collateral, providing intraday liquidity and offering access to the bank’s digital payment infrastructure and the JPM Coin token. .
Tyrone Lobban, head of JPMorgan’s blockchain launch and ODA, said that the bank aims to get ahead of a trend where it sees a broader range of traditional financial services being offered through blockchain technology:
“There will be an ever-increasing set of financial activities taking place on the public blockchain, so we want to make sure that we are able to not only support that, but also be prepared to provide related services.”
Earlier this week, the European bank BNP Paribas carried out its first operation through the ODA to explore trading in the tokenized fixed income market.
Speaking about the movement, the managing director of BNP Paribas Global Markets and head of repo trading and sales in the United States, Christopher Korpi, highlighted the importance of being able to streamline its processes through blockchain technology:
“Tokenized assets and Onyx digital assets will enable accurate intraday liquidity management. As such, they could be instrumental in adding speed to collateral, securities settlement, and ultimately mitigating systemic risks through intraday credit reduction. Onyx Digital Assets will further bolster the intraday fungibility of UST and USD Cash.”
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