JPMorgan pilots blockchain-based collateral
JPMorgan aims to allow investors to pledge a wide range of assets as collateral via its proprietary blockchain. The blockchain network serves as a bridge between institutional investors and decentralized financial platforms (DeFi) of the crypto economy.
Last week, US bank JPMorgan successfully conducted a pilot for collateral settlement over its private blockchain network. The company used its blockchain platform to trade traditional financial assets. To do this, two JPMorgan companies transferred the token representation of BlackRock money market fund shares as collateral over their own private blockchain network.
JPMorgan said the experiment demonstrated that a wide range of assets could be pledged as collateral. In addition, one is independent of bank and stock exchange opening hours.
Blockchain-based collateral is possible in derivatives settlement, repo trading and securities lending. JPMorgan plans to expand its collateral processing offering to equities, fixed income and other asset classes.
In an interview with Bloomberg, Ben Challice, JPMorgan’s Global Head of Trading Services said:
“What we have achieved is the seamless real-time transfer of collateral. While BlackRock was not a counterparty, it has been heavily involved from day one and is evaluating the use of this technology.”
JPMorgan experiment with blockchain and crypto
JPMorgan has been actively involved in the blockchain and crypto space in recent years. In 2020, for example, Onyx Digital Assets (ODA) was founded. Besides, the bank also has its own blockchain network with its own cryptocurrency JPMCoin.
Tyrone Lobban, head of JPMorgan’s Blockchain Launch and Onyx Digital Assets, said his blockchain serves as a bridge between institutional investors and decentralized finance (DeFi) platforms in the crypto economy. He added :
“As the crypto sector grows, there will be an increasing number of financial activities taking place on the public blockchain, so we want to document that we are not only able to support this, but are also willing to offer related services. “
JPMorgan’s blockchain and ODA platform has been used by several banks to conduct tokenized bond trading. To date, the blockchain platform has had more than $300 billion worth of repo transactions. Participating banking institutions include BNP Paribas SA and Goldman Sachs Group Inc.
Some of the largest financial institutions like Goldman Sachs and BlackRock are also working on tokenizing the traditional asset classes. These financial institutions are exploring the use of blockchain in various use cases such as mortgage lending, interbank payments, and cross-border transactions.
Earlier this month, JPMorgan also presented a blockchain that is said to be able to withstand attacks by quantum computers. The background is that there are fears that quantum computing will one day be able to decode a blockchain network.