The global leader in providing financial services to institutional investors, JPMorgan (JPM), is planning to tokenize traditional assets and DeFi.
JPM’s Onyx Digital Assets will be leveraged to tokenize its assets, such as bonds, money market funds, and US Treasury, and use them as collateral for DeFi pools.
Tyrone Lobban, head of Onyx Digital Assets said, “The overall goal is to bring these trillions of dollars of assets into DeFi, so that we can use these new mechanisms for trading, borrowing [and] lending, but with the scale of institutional assets.”
The MNC investment bank intends to implement the tokenization of traditional assets in two parts.
JP Morgan Chase’s Blockchain-based collateral settlement system is one indication. It recently carried out a transaction in which two bank entities transferred token representations of BlackRock money market fund shares.
The second is Project Guardian, a pilot project that aims to conduct secured borrowing and lending on a public blockchain-based network using smart contracts.
The MAS recently announced a project named ‘Project Guardian’ to test institutional-friendly DeFi using permissioned liquidity pools made up of tokenized bonds and deposits.
Tokenization of assets will involve public blockchains and will almost certainly have a permissioned structure similar to Aave Arc and Fireblocks, but with two differences.
A JPMorgan trader must prove he has the rights and entitlements to trade on behalf of the Wall Street bank, i.e. participating financial institutions will verify consumer information.
Another distinction is the novel approach to permissioned DeFi implemented using digital identity building blocks.
“Verifiable credentials are interesting because they can introduce the scale that you need to provide access to these pools without necessarily having to maintain a white list of addresses. Since verifiable credentials are not held on-chain, you don’t have the same overhead involved with writing this kind of information to the blockchain, paying for gas fees, etc” Lobban said.