JPMorgan Unveils Blockchain-Based Collateral Mechanism in BlackRock-Barclays Trade

Oct 12
To further business applications based on cryptocurrency technology, JPMorgan Chase & Co. has released its first blockchain-based collateral computation for clients.

According to Tyrone Lobban, head of Onyx Digital Assets at JPMorgan, BlackRock Inc. converted shares of one of its money market funds into digital tokens and then transferred those tokens to Barclays Plc. as collateral for over-the-counter derivatives trading between two institutions using JPMorgan's tokenized collateral network, or TCN.
Although this is a rare instance of a blockchain application created by a bank being commercialized, the amounts involved are still modest when compared to JPMorgan's overall company.

Even though Wall Street firms have spent the better part of a decade investigating methods to utilize blockchain to streamline some of their more complicated operations, the lack of commercial applications has led some to wonder whether the technology is useful in the banking industry.

According to Ed Bond, head of trading services at JPMorgan, the bank eventually aims to let customers use other assets as collateral, such as stocks and fixed income, through the app.

"Institutions on the network can use a wider range of assets to meet any collateral requirements they have as a result of trading," Bond stated in an interview.

Supporters of blockchain claim that because shares in money market funds won't need to be redeemed for cash as they presently are when utilizing conventional procedures, financial institutions will find it easier to use those shares as collateral. In times of market stress, this will hasten trades and possibly lower risks.

JPMorgan also makes use of a program called JPM Coin, which lets wholesale customers use a blockchain network to send payments in dollars and euros. Up until June of this year, the bank processed nearly $300 billion through it.

To speed up cross-border settlements, the company is also introducing a blockchain-based repo application and investigating a digital deposit token.

The majority of JPMorgan's main rivals are supporting blockchain and digital asset projects as well. The digital asset platform from Goldman Sachs Group Inc. was announced in November, with the company claiming that clients could use it to issue financial securities in the form of digital assets in sectors like real estate.

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