JPMorgan Chase & Co., the largest U.S. bank by assets, has successfully completed its first collateral settlement using blockchain technology.
This milestone was achieved through the Tokenized Collateral Network (TCN), which shares shares of BlackRock Inc. convert into digital tokens for an over-the-counter derivatives trade with Barclays.
JPMorgan dives deeper into blockchains for traditional finance
This is a rare example of a blockchain application developed by banks being brought to market. It also underlines the potential efficiency gains of such technology in the financial sector.
Tyrone Lobban, Head of Onyx Digital Assets at JPMorgan, said:
“Using the bank’s Onyx Digital Assets blockchain network, collateral moved almost instantly, compared to over the course of a day.”
The TCN expands the scope of assets that can be used as collateral, including equities and fixed income. Ed Bond, head of trading services at JPMorgan, explained:
“Institutions on the network can use a broader range of assets to meet the collateral requirements they have as a result of trading.”
Read more: What’s Blockchain Interoperability?
The blockchain application is now live, with a pipeline of other clients and transactions in the works. This development is expected to streamline financial transactions, make them faster and potentially reduce risks in times of market stress.
“Money market funds play an important role in providing liquidity to investors during times of high market volatility,” said Tom McGrath, Deputy Global Chief Operating Officer of the Cash Management Group at Blackrock. He continued,
“The tokenization of money market fund shares as collateral in clearing and margin transactions would dramatically reduce operational friction in meeting margin calls when segments of the market face acute margin pressure.”
A sister blockchain to JPM Coin
JPMorgan also operates a system called JPM Coin, a blockchain-based system that allows wholesale customers to make payments in dollars and euros. The bank has processed approximately $300 billion since its inception.
However, the introduction of JPM Coin has sparked speculation about its potential impact on other cryptocurrencies, such as XRP. As a stablecoin, JPM Coin is pegged to the US dollar, providing stability crucial for large-scale transactions within JPMorgan’s wholesale payments business.
Number of blockchain wallet users worldwide. Source: JPMorgan
Unlike XRP, JPM Coin is a closed network solution within the JPMorgan Chase ecosystem.
Despite the closed network design, the recent introduction of euro payments for JPM Coin suggests a broader expansion plan. This could increase its use and market reach.
JPM Coin is responsible for just a fraction of JPMorgan’s $10 trillion daily payments. However, the growth potential is enormous. The ability to make payments faster than traditional transactions could be a game-changer in the industry.
