JPMorgan is Using Blockchain For Collateral Settlement in Trading and Lending

While Wall Street is experimenting with blockchain in trading traditional financial assets, JPMorgan has started using blockchain for collateral settlements.

Bishal Kumar Chanda3 min read
JPMorgan is Using Blockchain For Collateral Settlement in Trading and Lending

While Wall Street is experimenting with blockchain in trading traditional financial assets, JPMorgan has started using blockchain for collateral settlements.

JPMorgan's First Transaction Involved BlackRock Assets

Furthermore, the multinational investment bank's first such transaction happened on May 20. In the pilot blockchain transaction, JPMorgan transferred tokenized BlackRock Inc. money market fund shares as collateral on its private blockchain.

A money market fund is a type of mutual fund that investors consider a low-risk investment. Further, it offers exposure to short-term and liquid assets like cash, cash equivalents, and high credit rating debt securities.

Meanwhile, BlackRock is the world's largest asset manager. Although BlackRock was not a counterparty, "they have been heavily involved since Day One, and are exploring use of this technology."

"What we've achieved is the friction-less transfer of collateral assets on an instantaneous basis," said JPMorgan's global head of trading services, Ben Challice.

According to JPMorgan, these efforts will enable investors to use a range of assets as collateral. In addition, it will also allow investors to carry out transactions outside of market operating hours.

Moreover, crypto-based collateral settlements can also be used for derivatives, repo trading, and securities lending. Thus, JPMorgan also plans to expand tokenized collaterals to include fixed income equities and other asset types.

JPMorgan's Previous Blockchain Efforts

Over the past few years, JPMorgan has been heavily involved in blockchain technology and has increasingly embraced digital assets. According to the head of JPMorgan's Blockchain Launch, Tyrone Lobban, JPMorgan's blockchain could potentially become a bridge between institutional investors and decentralized finance platforms.

With the growing crypto industry, "there will be a growing set of financial activities that happen on the public blockchain, so we want to make sure that we are able to not only support that but also be ready to provide related-services," Lobban added.

In 2016, JPMorgan launched an enterprise version of Ethereum, Quorum, acquired by ConsenSys in August 2020. Following the Quorum sale, JPMorgan launched its new internal blockchain product, Onyx, in October 2020, along with an internal stablecoin. JPMorgan described the new product as a "blockchain-based network that enables the processing, recording, and Delivery-versus-Payment (DVP) exchange of digital assets across asset classes."

Also, JPMorgan started using blockchain for repurchase borrowing transactions in 2020. More than $300 billion worth of assets has been handled through those transactions.

JPMorgan CEO Remains Critical of Bitcoin

Meanwhile, despite the company's recent willingness to embrace blockchain technology, its CEO, Jamie Dimon, has a long-standing hostility toward Bitcoin. In fact, Dimon has even called Bitcoin a "fraud" and "worthless." However, more recently, he has admitted that there is a client demand for Bitcoin.

Also, a recent investor note from JPMorgan quoted Bitcoin's fair value at $38,000, which is higher than its current value of $28,800.

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