In a pioneering move, JPMorgan Chase & Co (NYSE:JPM) has utilized its blockchain technology to execute a collateral settlement for BlackRock (NYSE:BLK), marking a significant stride in the application of blockchain in financial transactions. This transaction was facilitated through JPMorgan's Tokenized Collateral Network (TCN), which converted BlackRock's money market fund shares into digital tokens for an over-the-counter derivatives trade with Barclays Plc.
On Wednesday, BlackRock employed JPMorgan's Ethereum-based Onyx blockchain and TCN to tokenize its money market funds (MMFs) shares. The shares were subsequently transferred to Barclays as collateral in an OTC derivatives trade. The transaction was enabled by the connectivity between the fund's Transfer Agent and TCN.
Tyrone Lobban, Head of Onyx Digital Assets at JPMorgan, stated that this technological breakthrough offers clients intraday liquidity via repo transactions and a more efficient way to meet margin requirements using tokenized MMF shares. Tom McGrath, Deputy Global COO of the Cash Management Group at BlackRock, echoed Lobban's sentiment, underscoring the potential of tokenization to reduce operational friction during periods of acute margin pressures.
JPMorgan's Onyx blockchain network, led by Tyrone Lobban, allows asset collateralization and ownership transfer without physical asset movement. This feature was confirmed by Ed Bond, JPMorgan's head of trading services.
In addition to this development, JPMorgan is actively exploring other applications of blockchain technology. The bank's digital currency, JPM Coin, used for euro-based corporate payments, is part of this broader exploration. Other areas being explored include cross-border transactions, retail applications, and a blockchain-based repo application. The bank is also investigating a digital deposit token for faster settlements and collaborating with central banks on various blockchain projects.
The first test of TCN was conducted internally in May. This recent transaction with BlackRock marks the first real-world application of the technology, demonstrating its viability in streamlining financial transactions and improving the efficiency of collateral settlements.
Source : Investing.com / October 11, 2023