JPMorgan Chase & Co. has launched its new blockchain-based Tokenized Collateral Network (TCN) app, which is used by BlackRock Inc. as a client.
From now on, clients will be able to use tokenized assets as collateral.
Summary
JPMorgan and the blockchain-based Tokenized Collateral Network (TCN)
JPMorgan Chase & Co. has launched the first blockchain-based collateral settlement for clients.
“JPMorgan has launched the first collateral settlement for clients, using blockchain, as the largest U.S. bank by assets pushes commercial applications built on the technology behind cryptocurrency.”
This is the Tokenized Collateral Network (TCN) application, which allowed BlackRock Inc to convert shares in one of its money market funds into digital tokens.
These tokenized assets were then transferred to Barclays Plc as warranty for an over-the-counter derivatives transaction between the two institutions.
This is one of the rare instances in history of a bank developing a blockchain-based application and making it available to its customers.
JPMorgan: Bank markets new blockchain-based application to BlackRock
It was Tyrone Lobban, head of Onyx Digital Assets at JPMorgan, who described the BlackRock case in an interview with Bloomberg.
Specifically, Lobban highlighted how the bank’s Onyx Digital Assets blockchain network allows collateral to be transferred almost instantaneously, rather than within a day.
This means that, at scale, the technology would increase efficiency by freeing up locked-up capital to be used as collateral in ongoing transactions.
Ed Bond, head of trading services at JPMorgan, also said that the bank intends to use the application to allow clients to use other assets as collateral, including equities and fixed income.
JPMorgan tested TCN with an internal transaction in May. In BlackRock’s case, Tom McGrath, deputy global chief operating officer of BlackRock’s cash management group, said:
“Money market funds play an important role in providing liquidity to investors in times of high market volatility,” Tom McGrath, deputy global chief operating officer of the cash management group at Blackrock said in a statement. “The tokenization of money market fund shares as collateral in clearing and margin transactions would dramatically reduce the operational friction in meeting margin calls when segments of the market face acute margin pressures.”
The payment system and JPM Coin
Last month, news leaked that US banking giant JPMorgan was in the midst of a new project to create a new digital token payment system.
Indeed, four years ago the bank launched JPM Coin, its blockchain-based token allowing wholesale clients to make dollar and euro payments.
From its launch until June this year, the bank used it to process around USD 300 billion.
However, the new project in question appears to be a new deposit token, a transferable digital currency that represents a deposit request sent to a commercial bank, which is a digital version of the deposits that bank customers hold in their fiat currency accounts.
