BlackRock and Barclays Use JPMorgan’s Blockchain to Process Collateral Settlements First
To facilitate a derivatives deal, JPMorgan has tokenized BlackRock shares using its Tokenized Collateral Network (TCN).
Its Tokenized Collateral Network (TCN) made this possible by tokenizing shares in BlackRock Inc. so they could be traded with Barclays in an OTC derivatives transaction.
It’s not often that blockchain software created by a bank actually makes it to market. The potential for efficiency improvements in the financial industry due to the use of such technologies is also highlighted.
JPMorgan’s head of Onyx Digital Assets, Tyrone Lobban, made the following statement: “Collateral was able to be transferred in less than a day thanks to the use of the bank’s blockchain network, Onyx Digital Assets.”
The TCN enlarges the pool of available collateral to include stocks and fixed-income instruments. The blockchain app has been released, and additional users and transactions are in the works. It is anticipated that this change would facilitate quicker financial transactions while also decreasing risks during periods of market stress.
“Money market funds are very helpful for investors because they give them access to cash when the market is very volatile,” said Tom McGrath, deputy global chief operating officer of the cash management group at Blackrock. He elaborated,
“When some parts of the market are experiencing extreme margin pressures, the operational friction in responding to margin calls might be greatly reduced if money market fund shares were tokenized and used as collateral in clearing and margining operations.”
JPMorgan also operates a blockchain-based system called JPM Coin, which allows wholesale customers to send and receive payments in US dollars and Euros. Since its launch, the bank has utilized it to handle transactions totaling close to $300 billion.
There has been some talk regarding how the launch of JPM Coin would affect other cryptocurrencies like XRP. JPM Coin is a stablecoin that is tied to the US dollar, providing the kind of predictability that is essential for the massive transactions that take place in JPMorgan’s wholesale payments division.