JPMorgan uses blockchain for collateral settlements

American multinational investment bank has been using blockchain technology since late 2020

The JPMorgan Chase headquarters on Park Avenue in New York                                 
The JPMorgan Chase headquarters on Park Avenue in New York - Photo: Alamy
                                

JPMorgan, the American multinational investment bank and financial services holding company, is using its private blockchain for collateral settlements.

JPMorgan’s first transaction using blockchain came on 20 May Bloomberg reports, which saw two of its entities transfer a tokenised representation of a BlackRock money market fund.    

The move into blockchain technoplogy will allow investors to use a wider range of assets as collateral and use them outside of market operating hours ,according to JPMorgan.  

Ben Challice, global head of trading services at JPMorgan, said: “What we’ve achieved is the frictionless transfer of collateral assets on an instantaneous basis. They [BlackRock] have been heavily involved since day one and are exploring use of this technology.”

The investment bank plans to expand tokenised collaterals to include equities, fixed income and other asset types.

Connecting institutional investors to DeFi

Tyrone Lobban, the head of JPMorgan’s Blockchain Launch team and its Onyx Digital Assets subsidiary, said that blockchain has the power to potentially act as a bridge that connects institutional investors with decentralised finance (DeFi) platforms in the crypto economy.

Lobban said that as the crypto sector grows, “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.”

Since 2020 JPMorgan has been using blockchain

The bank has been using blockchain to conduct intraday repurchase agreements (repo) which is a form of short-term borrowing for dealers in government securities, since late 2020.

Thus far, repo transactions worth more than $300bn (£238bn) have been processed on JPMorgan’s network.

Both Vanguard, an American registered investment adviser, and State Street, an American financial services and bank, have traded foreign exchange (forex) forward contracts using blockchain technology to reduce counterparty risks.  

Goldman Sachs and BlackRock are also working on the tokenisation of a range of traditional asset classes.

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