JPMorgan Chase, a major financial institution, has unveiled its blockchain-based collateral settlement system. The Tokenized Collateral Network (TCN) of JPMorgan Chase was used for the first time by Blackrock. In order to use digital tokens as security in an over-the-counter derivatives exchange with Barclays Plc, the world's largest asset management used the technology to convert shares in one of its money market funds into digital tokens.
The Tokenized Collateral Network by JPMorgan
According to Bloomberg on Wednesday, JPMorgan Chase & Co. has finished the first blockchain-based collateral settlement for clients. Blackrock, the largest asset manager in the world, used JPMorgan's Tokenized Collateral Network (TCN) to turn shares from one of its money market funds into digital tokens, according to Tyrone Lobban, head of Onyx Digital Assets at JPMorgan. Then, in an over-the-counter derivatives exchange with Barclays Plc, these digital tokens were utilized as collateral.
According to a press release from the banking behemoth, "Blackrock and Barclays are now live on TCN, an application that sits on J.P. Morgan's Onyx Digital Assets platform, operating as a private blockchain that is used for tokenized asset movements including collateral settlements." According to JPMorgan's website:
An application called Tokenized Collateral Network (TCN) enables investors to use assets as collateral. Starting with money market funds, transfer ownership of the collateral without shifting the assets in the underlying ledgers and while keeping your investment.
Almost instantaneous collateral transfers are made possible by JPMorgan's blockchain network, Onyx Digital Assets, according to Lobban. He also noted that when this technology is widely used, efficiency will increase since it will free up capital that has been locked up and make it accessible as collateral in ongoing transactions. In May, JPMorgan used an internal transaction to test TCN.
The program will also allow customers to use a wider variety of assets as collateral, including equities and fixed income, according to Ed Bond, Head of Trading Services at JPMorgan. The CEO emphasized: "The bank already has a pipeline of other clients and transactions for TCN."
Institutions on the network have access to a greater range of assets to satisfy any collateral needs arising from trading.
Money market funds are crucial for giving investors access to liquidity during periods of severe market volatility, according to Tom McGrath, deputy global chief operating officer of Blackrock's Cash Management Group. Added him:
When market segments are under intense margin pressure, the operational friction in meeting margin calls would be greatly reduced if shares of money market funds were tokenized and used as collateral in clearing and margining operations.
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