JPMorgan conducts pilot trials on its blockchain for collateral settlement

JPMorgan Chase & Co, a multinational investment bank, is apparently testing the use of its own private blockchain for collateral settlements.
JPMorgan conducts pilot trials on its blockchain for collateral settlement
JPMorgan conducts pilot trials on its blockchain for collateral settlement

Bloomberg reports that JPMorgan performed a test transaction last Friday in which two of its businesses transferred a tokenized version of Black Rock Inc. money market fund shares.

A money market fund is a form of mutual fund that exposes liquid and short-term assets such as cash, cash equivalents, and debt securities with good credit ratings, making it a low-risk investment.

According to the bank, JPMorgan’s more enormous ambition for its private blockchain is to allow investors to submit a wide range of assets as collateral, which may be used outside of usual market hours. It specifically mentioned equities and fixed income.

“What we’ve achieved is the friction-less transfer of collateral assets on an instantaneous basis,” stated JPMorgan’s global head of trading services Ben Challice. BlackRock wasn’t a counterparty but it has been heavily involved in the initiative “since day one and are exploring use of this technology.”

JPMorgan has been interested in crypto and blockchain technology for a long time, and in late 2020, it launched Onyx Digital Assets (ODA). The project is a “blockchain-based network that facilitates the processing, recording, and Delivery-versus-Payment (DVP) exchange of digital assets across asset classes,” according to the description.

While it’s unclear whether JPMorgan used the ODA in this case, the network is designed to swap cash for various types of tokenized collateral, provide intraday liquidity, and provide access to the bank’s digital payment infrastructure and token JPM Coin.

Tyrone Lobban, the head of JPMorgan’s Blockchain Launch and the ODA, said the bank is attempting to anticipate a trend in which a greater range of traditional financial services will be supplied via blockchain technology:

BNP Paribas, a European bank, completed its first trade through the ODA earlier this week to test tokenized fixed income market trading.

Christopher Korpi, managing director and head of US repo trading and sales at BNP Paribas Global Markets, spoke about the significance of being able to optimize business procedures using blockchain technology:

“Tokenized assets and Onyx Digital Assets will allow for precise intraday liquidity management. As such, they could be foundational to adding velocity to collateral, security settlement and ultimately decreasing systemic risks through reduction of intraday credit. Onyx Digital Assets will further reinforce the intraday fungibility of UST and USD Cash.”