JP Morgan tests blockchain for collateral settlement in after-hours trading

“What we have achieved is the frictionless transfer of collateral instantaneously”,  said JPMorgan’s global head of trading services, Ben Challice.

Multinational investment bank JPMorgan Chase & Co is testing the use of its own private blockchain for collateral settlement.

According to Bloomberg News, JPMorgan conducted a pilot transaction on 20 May, in which two of its entities transferred a tokenised representation of shares of money market fund shares from Black Rock Inc, a leading global investment bank.

A money market fund is a type of mutual fund that is considered a low-risk investment because it offers exposure to liquid, short-term assets such as cash, cash equivalents and highly rated debt securities.

As for JPMorgan’s broader vision for its private blockchain, the bank said it intends to allow investors to present a wide range of assets as collateral that can also be used outside of regular market hours. It emphasised equities and fixed income in particular.

“What we have achieved is the frictionless transfer of collateral instantaneously,” said JPMorgan’s global head of trading services, Ben Challice. BlackRock was not a counterparty, but has been heavily involved in the initiative “from day one and is exploring the use of this technology”.

JPMorgan has been actively involved in cryptocurrency and blockchain technology for quite some time, and also founded Onyx Digital Assets (ODA) in late 2020. The project is described as a “blockchain-based network that enables the processing, recording and Delivery-versus-Payment (DVP) exchange of digital assets across asset classes.”

While it has not been specifically outlined whether JPMorgan used ODA in this case, the network is prepared to exchange cash for different types of tokenised collateral, providing intraday liquidity and offering access to the bank’s digital payments infrastructure and the JPM Coin token.

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Tyrone Lobban, head of JPMorgan’s blockchain launch and ODA, said the bank aims to get ahead of a trend where it sees a wider range of traditional financial services being offered through blockchain technology:

“There will be an increasing set of financial activities taking place on the public blockchain, so we want to make sure we are able to not only support that, but also be prepared to provide related services.”

 

 

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