JPMorgan starts using Blockchain for Collateral Settlements

Key Takeaways

  • JPMorgan targets tokenized collateral to cover equities, fixed income, and other asset classes in the future.
  • The bank had been using blockchain since 2020 for repo transactions and for intraday repurchases.

Multinational Investment Bank JPMorgan Chase & Co is using blockchain for collateral settlements, according to a Bloomberg report. The bank made its first transaction on May 20, when two of its entities transferred the tokenized money market fund shares of BlackRock Inc. as collateral on its private blockchain.

With this new move, the finance giant is assisting investors in pledging and utilizing different assets outside of market hours. The bank plans to expand tokenized collateral to cover equities, fixed income, and other asset classes in the future months. JPMorgan, to make collateralized trade more seamless, has also launched an Onyx Digital Assets Blockchain-based application. This will allow investors to seamlessly transfer tokenized shares as collateral on the blockchain. However, to prevent hiccups along the way, the collateral provider and receiver must be present on the blockchain application.

Ben Challice, JPMorgan’s global head of trading services, commenting on the new development, said, “What we have achieved is the friction-less transfer of collateral assets on an instantaneous basis. While BlackRock wasn’t a counterparty, they have been heavily involved since Day One and are exploring the use of this technology.” Tyrone Lobban, the head of JPMorgan’s Blockchain Launch and Onyx Digital Assets, believes JPMorgan’s blockchain could potentially be a bridge that connects institutional investors with Defi platforms in the crypto economy.

This is not the first time JP Morgan has tried its luck at Blockchain tech. The finance giant in 2018 launched Interbank Information Network (IIN), a scalable, peer-to-peer network powered by blockchain technology. The banking major has been utilizing the blockchain since 2020 for repo transactions and to conduct intraday repurchases. According to Bloomberg reports, the bank has recorded an astounding $300 billion in repo transactions to date. 

JP Morgan also launched a new internal blockchain product called Onyx and its own internal stablecoin in late 2020. The company’s consistent efforts to embrace Bitcoin and its CEO Jamie Dimon’s increasingly less hostile stand towards Bitcoin have made JPMorgan a valued part of the crypto ecosystem. Dimon had earlier described Bitcoin as “fraud” and “worthless” but now has conceded that client demand for it exists.

The new development comes amidst a time when major Wall Street players had begun embracing blockchain-based cryptocurrencies after years of persistent opposition. Jefferies Financial Group had recently expanded its banking services for crypto clients while Goldman Sachs upped its crypto trading. BlackRock Inc. recently also formed a partnership and invested in stablecoin company Circle.

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Saniya Raahath

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