JPMorgan tests private blockchain for collateral settlement

JPMorgan tests private blockchain for collateral settlement

JPMorgan Chase & Co. is testing its private blockchain for collateral settlement. Bank plans to allow investors to use multiple assets as collateral

By Shashank Bhardwaj


Image: Shutterstock

JPMorgan Chase & Co. would test the use of private blockchain for collateral settlement. The multinational investment bank carried out a pilot transaction in which two of its entities transferred the token representation of shares of money market fund BlackRock Inc. (the world’s largest asset manager) as collateral on its blockchain private on Friday, May 20. The initiative will allow investors to pledge and use a wider range of assets as collateral outside market hours.

Ben Challice, global head of trading services for JP Morgan, noted that the above-mentioned transaction enabled “the frictionless transfer of collateral assets on an instantaneous basis.”

A money market fund is a mutual fund that invests in liquid, short-term assets such as cash, cash equivalents, and high-quality debt securities. It is considered a low risk investment.

This news comes just days after it was revealed that French bank BNP Paribas had joined the blockchain-powered network overseen by JPMorgan to use digital tokens for short-term trading in fixed income markets, thus entering a market of 12,000 billion dollars.

As counterparty, Blackrock was not directly involved in the transaction. According to Ben Challice, global head of trading services at JPMorgan, Blackrock has been “strongly involved from day one and exploring the use of this technology”. The bank added that it plans to expand its efforts to include equities, fixed income securities and other types of assets in the coming months.

JPMorgan has been involved in blockchain for several years and has developed a number of products. In October 2020, JPMorgan launched Onyx Digital Assets (ODA), which is a “blockchain-based network that enables the processing, recording, and delivery-versus-payment (DVP) exchange of digital assets across asset classes. of assets”. first trade with the help of the ODA earlier this week.

Christopher Korpi, Managing Director of BNB Paribus Global Markets and Head of US Repo Trading and Sales, agreed on the importance of blockchain in streamlining processes. He said, “Tokenized assets and Onyx Digital Assets will enable precise intraday liquidity management. As such, they could be fundamental in adding speed to collateral, collateral settlement and ultimately reducing systemic risk by reducing intraday credit. Onyx Digital Assets will further strengthen the intraday fungibility of UST and USD Cash.

While it is unclear whether JPMorgan used ODA in this case, the network is preparing to exchange cash for various types of token collateral, enabling intraday liquidity and providing access to payment infrastructure. digital bank and JPM Coin token.

Tyrone Lobban, Head of Blockchain Launch at JPMorgan and ODA, said: “There will be an increasing set of financial activities taking place on the public blockchain, so we want to make sure that we We are able to not only support this, but also be ready to provide related services.”

The bank also said it plans to allow investors to submit various assets as collateral, which can also be used outside normal market hours as part of its broader vision for its private blockchain. The bank specifically mentioned equities and fixed income securities.

Shashank is the founder of yMedia. He ventured into crypto in 2013 and is an ETH maximalist. Twitter: @bhardwajshash