In a significant development, JPMorgan Chase & Co. (NYSE: JPM) has launched its inaugural blockchain collateral settlement system. The new system was unveiled via the Tokenized Collateral Network (TCN), which was employed by BlackRock to tokenize shares in one of its money market funds. Subsequently, these tokens were transferred to Barclays Plc for use as collateral in an OTC derivatives trade.
The news was made public by Tyrone Lobban, head of Onyx Digital Assets at JPMorgan. Lobban emphasized that the blockchain technology expedites the transfer process, enhancing efficiency and freeing up locked capital for use as collateral in ongoing transactions.
Despite this being a positive stride, the volume remains minuscule compared to JPMorgan’s larger business. The company plans to expand the technology’s utility, allowing clients to use other assets as collateral.
While BlackRock is the pioneer user of JPMorgan’s TCN tool, Lobban anticipates other firms will follow. Experts agree, suggesting the technology simplifies the use of shares in money-market funds as collateral, as institutions won’t need to redeem tokens for cash.
Tom McGrath, deputy global chief operating officer of the cash management group at BlackRock, said, “The tokenization of money market fund shares as collateral in clearing and margining transactions would dramatically reduce the operational friction in meeting margin calls when segments of the market face acute margin pressures.”
Notably, JPMorgan isn’t alone in this venture. Competitors like Goldman Sachs Group Inc. (NYSE: GS) also disclosed its digital asset platform last November, indicating a growing trend towards blockchain-based solutions in the financial sector.
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