TradFi convergence: JPMorgan tokenizes collateral settlements
Updated: Jun 21
Investment bank JPMorgan Chase has announced that it is now using blockchain for collateral settlements, the latest convergence of the traditional finance (TradFi) and Wall Street.
The bank's first transaction of this kind was in May, when two of its entities transferred tokenized versions of shares in BlackRock money market fund as collateral on its private blockchain. New York-based JPMorgan says that part of the appeal in this kind of transaction is the opportunity it presents to investors to pledge a wider range of assets as collateral and use them outside of the traditional market's trading hours.
JPMorgan’s global head of trading services, Ben Challice said:
What we’ve achieved is the friction-less transfer of collateral assets on an instantaneous basis
While BlackRock wasn't a counterparty in the experimental transaction, "they have been heavily involved since Day One, and are exploring use of this technology", the head of trading continued.
Today, Blockchain-based collateral settlement can be used for transactions such as derivatives and repo trading, as well as securities lending. Tomorrow, the bank plans to continue experimenting with the use case of blockchain in the trading of traditional financial assets with aims expand the token representations of collaterals to soon include equities, fixed income and other financial asset types.