American banking firm JP Morgan Chase and Co. recently conducted a transaction wherein it used blockchain for collateral settlements.
The transaction took place on May 20, when two entities of the bank transferred token representations of BlackRock money market fund shares. The funds were collateral on the bank’s private blockchain.
Ben Challice, JPMorgan’s global head of trading services said, “What we’ve achieved is the friction-less transfer of collateral assets on an instantaneous basis.”
While BlackRock wasn’t a counterparty, JP Morgan says they were heavily involved “since Day One, and are exploring use of this technology.”
Blockchain-based collateral settlement can be used for transactions such as derivatives, repo trading and securities lending. The bank believes this will allow investors to pledge a wider range of assets as collateral and even use them outside of market operating hours.
Moreover, in the upcoming months JP Morgan is planning to expand tokenized collaterals to include equities, fixed income and other asset types.
JP Morgan is also working on providing access to its digital payment infrastructure and native token JPM Coin.
According to Tyrone Lobban, head of JPMorgan’s Blockchain Launch and Onyx Digital Assets, blockchain could become a bridge that connects institutional investors with Defi platforms in the crypto economy.
He said that with the growth of the crypto sector, “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.”
JP Morgan has been using blockchain for intraday repurchase, or repo since 2020. The bank has conducted more than $300 billion of repo transactions till date. These transactions include Goldman Sachs and BNP Paribas among others.
Despite its hesitations, Wall Street has had to gradually work towards crypto adoption. Recently another Wall Street giant, Goldman Sachs offered its first Bitcoin-backed loan to crypto exchange platform, Coinbase Global.