JPMorgan Chase & Co., the bank of all the U.S. banks, has successfully launched its first-ever collateral settlement on Tokenized Collateral Network (TCN), Bloomberg said on Oct. 11.
JPMorgan has achieved a milestone as its first blockchain-based collateral settlement successfully debuted for BlackRock-Barclays. TCN facilitated its trade with the asset management powerhouse BlackRock Inc. and Barclays as the first users.
JPMorgan Spearheads Blockchain-Powered Collateral Settlement
BlackRock reportedly utilized the system to tokenize “shares in one of its money market funds” These digital tokens were subsequently transferred to Barclays Plc to support an over-the-counter derivatives trade between BlackRock and Barclays, according to Tyrone Lobban, Head of Onyx Digital Assets & Blockchain Launch at JPMorgan.
TCN is one of JPMorgan’s major forays into blockchain. Launched in 2021, the network allows participants to tokenize and exchange collateral assets. With TCN, JPMorgan aims to facilitate collateral transfers and reduce the risk of fraud and errors.
JPMorgan additionally targets to diversify the types of assets that can be used as collateral. By providing institutions with greater flexibility in their collateral choices, this forward-thinking approach not only expands the possibilities within collateral management but also empowers businesses with a wider range of options.
The bank’s progressive outlook aligns with the broader trend in the financial industry, where institutions are actively exploring blockchain’s transformative capabilities to reshape conventional processes and open up new avenues for the sector.
“Institutions on the network can use a wider scope of assets to meet any collateral requirements they have on the back of trading,” said Ed Bond, Head of Trading Services Asia Pacific at JPMorgan.
Last month, the banking giant said it was building a new digital currency that will operate similarly to stablecoins and CBDCs. The currency is set for money transfers to banks outside the system or for encrypted securities.
JPMorgan has already completed most of the infrastructure needed for the project, including the deposit feature, but cannot proceed before obtaining the license.
If approved, JPMorgan could launch the project for enterprise-level customers in 2024. The new digital currency is expected to be more accessible to a wider range of customers, including individuals and small businesses. It could also be used for a wider range of purposes, such as paying for goods and services online or sending money to friends and family abroad.
JPMorgan has been working on developing digital currencies for several years. The bank previously launched JPM Coin, a stablecoin-focused initiative that targets institutional and corporate clients. JPM Coin is used to facilitate seamless and secure cross-border transactions, shorten settlement times, and improve liquidity management.
A Catalyst for Other Players
There is a significant amount of investment being poured into blockchain technology. This investment is helping to drive the development of new blockchain applications and infrastructure.
Moreover, the number of businesses adopting the technology has increased. This growing adoption is helping to create a critical mass of users and businesses that are using blockchain.
Bringing blockchain to the forefront of the financial industry is the goal of several Wall Street players. Despite the tiny volumes, JPMorgan’s latest move has taken a closer step to transitioning the concept to practical implementation. Additionally, the successful debut could foster efficiency improvements and motivate other players.
In November last year, Goldman Sachs Group Inc., JPMorgan’s major rival, launched a tokenization platform called GS DAP.
Built on the Daml blockchain platform, the private blockchain aims to revolutionize the way that assets are traded and managed. The platform could make it easier for investors to access new asset classes and could help reduce the costs associated with asset transactions.
With more mega-banks entering the tokenization space, there will be more interest in tokens as an asset class.
