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JPMorgan Chase Conducts First Blockchain-Based Collateral Settlement with BlackRock and BarclaysJPMorgan Chase Conducts First Blockchain-Based Collateral Settlement with BlackRock and Barclays
Source: AdobeStock / monticellllo
The blockchain-based collateral settlement application of JPMorgan Chase & Co., a global banking giant, the Tokenized Collateral Network (TCN), is now live, having completed its inaugural transaction involving two significant clients: BlackRock and Barclays.
According to Bloomberg, the TCN allowed BlackRock to seamlessly convert shares from one of its money market funds into digital tokens. These tokens were then transferred to Barclays as collateral for an over-the-counter derivatives trade. Tyrone Lobban, head of Onyx Digital Assets at JPMorgan, confirmed this breakthrough, highlighting the efficiency gains.
Previously tested internally in May 2022, TCN demonstrated its potential by transferring tokenized representations of shares from a BlackRock money market fund for collateral on JPMorgan's private blockchain platform, Onyx Digital Assets. Now live, TCN is poised for wider adoption, with a pipeline of clients and transactions in the works, according to Ed Bond, head of trading services at JPMorgan.
TCN Revolutionizes Collateral Settlement with Near-Instant Transactions, Paving the Way for Broader Asset Coverage
TCN's rapid collateral movement drastically reduces settlement times, offering a stark improvement over the traditional day-long process. One of TCN's standout features is its remarkable speed compared to traditional collateral settlement methods. While conventional systems can take up to a full day to settle collateral, TCN's nearly instant settlement sets a new industry standard.
Beyond this milestone feature, JPMorgan envisions TCN's expansion to cover a broader range of assets, including equities and bonds. This move aims to provide institutions with greater flexibility in meeting their collateral requirements, ultimately enhancing their trading capabilities. If implemented broadly, it could free up capital for use as collateral in ongoing transactions, improving overall market efficiency.
JPMorgan's TCN not only marks a significant advancement in blockchain technology but also indicates the potential for private bank networks to gain significant traction. This development could challenge the dominance of platforms like Ethereum in the blockchain market.
Additionally, it's worth noting that JPMorgan also operates a blockchain-based payment system called JPM Coin, which offers extended operating hours and faster transaction speeds. The platform, launched in 2019 for dollar payments, allows wholesale payments clients to transfer dollars or euros between JPMorgan accounts around the world, or make payments to other customers of the bank using blockchain technology instead of traditional payment methods.
In June, JPMorganexpanded its JPM Coin blockchain payment service to include euro-denominatedtransactions for corporate clients.JPMorgan Goes Live with Its Blockchain-Based Collateral SettlementThe move signals a major stride on the part of JPMorgan as it intensifies its efforts towards boosting the commercial applications of blockchain technology.
United States’ largest bank by assets, JPMorgan Chase & Comay have started using its blockchain-based collateral settlement for customers. This follows after a recent transaction between BlackRock Inc and Barclays Plc saw the duo use JPMorgan’s Tokenized Collateral Network (TCN) to effect the trade.
According to Tyrone Lobban, head of Onyx Digital Assets at JPMorgan, BlackRock had used TCN to turn some shares into digital tokens before transferring the same to Barclays as collateral in an over-the-counter (OTC) derivatives deal the duo had going on. Lobban shared this while speaking in an interviewwith Bloomberg.
Meanwhile, the move signals a major stride on the part of JP Morgan as it intensifies its efforts towards boosting the commercial applications of blockchain technology.
JPMorgan Redefining Blockchain Technology in Finance
For what it’s worth, it is rarely seen that a bank develops a blockchain app. However, JPMorgan may be setting the pace in that area. That is even though the volumes, for now, are still tiny in comparison to the bank’s overall business.
For context, Wall Street firms have spent nearly a decade looking for ways to simplify some of their more complex processes using blockchain technology. However, the limited number of applications being used commercially makes one wonder whether the technology has any real-life applications in finance.
Now though, it appears that previous barriers in terms of complexity may be broken. According to JPMorgan’s Lobban, using the bank’s blockchain network Onyx Digital Assets, the collateral moved almost instantaneously. Thus, creating a better experience than before that one had to wait for an entire day.
With the app, JPMorgan hopes to eventually allow clients to use other assets as collateral. As Ed Bond, head of trading services at JPMorgan says, clients will eventually be able to use equities and even fixed income as collateral. To this end, Bond noted in an interview:
“Institutions on the network can use a wider scope of assets to meet any collateral requirements they have on the back of trading.”
Other Banks Are Keen on Floating Blockchain Projects
Meanwhile, just as JPMorgan is pushing, many of its biggest rivals also appear to be highly invested in blockchain and digital-asset projects.
Goldman Sachs Group Inc, for instance, unveiled its digital-asset platform last November. Whereas, asset managers, including Franklin Templeton, have also shown keen interest in using blockchain technology to process transactions for their funds.
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Mayowa is a crypto enthusiast/writer whose conversational character is quite evident in his style of writing. He strongly believes in the potential of digital assets and takes every opportunity to reiterate this. He's a reader, a researcher, an astute speaker, and also a budding entrepreneur. Away from crypto however, Mayowa's fancied distractions include soccer or discussing world politics.
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The proposal outlines a deal that encompasses roughly 9% of iFinex’s outstanding capital and assigns a value of $1.7 billion to the company.
As per the latest report, the parent firm of the Bitfinex exchange – iFinex Inc – has started exploring a $150 million share buyback, as per the letter written to shareholders on September 22. The directors of iFinex have proposed an offer of $10 per share for 15 million shares.
The document notes that a group of directors within iFinex and its subsidiaries are eligible to participate in the buyback. Among them, is Giancarlo Devasini, who previously worked as a plastic surgeon and currently serves as the Chief Financial Officer for both Tetherand Bitfinex.
It is worth noting that there is no specified minimum threshold for the number of shares to be offered for sale to trigger the buyback. iFinex is prepared to purchase as many shares as are made available until the maximum limit is reached. The company determined its valuation internally, using a variety of business metrics, without seeking validation from an independent third party. Shareholders need to express their intent to sell their holdings to iFinex by October 24.
Details of the Bitfinex Share Buyback
The proposal outlines a deal that encompasses roughly 9% of iFinex’s outstanding capital and assigns a value of $1.7 billion to the company. This agreement is contingent on the business securing an infusion of funds from at least one of its subsidiaries.
The offer is extended to shareholders who acquired iFinex stock through a 2016 swap arrangement with the investment platform BnkToTheFuture. In that year, Bitfinex experienced a hack resulting in the theft of approximately $71 million worth of Bitcoin, a sum now valued at approximately $3.3 billion. To compensate affected users, Bitfinex issued BFX tokens, which iFinex redeemed later in exchange for company shares through BnkToTheFuture.
The decision to initiate the buyback is due to the “positive performance” exhibited by the company in recent years, as stated by iFinex in a communication to Bloomberg News. Tether emphasized its separate identity from iFinex, albeit sharing common shareholders. Simon Dixon, the CEO of BnkToTheFuture, declined to comment on confidential client information.
By selling their shares back to iFinex, investors can alleviate the increasing demands placed on them to provide information in support of Bitfinex Group’s regulatory applications and to address heightened scrutiny. Additionally, this move allows them to exit a relatively illiquid investment.
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Author Bhushan Akolkar
Bhushan is a FinTech enthusiast and holds a good flair in understanding financial markets. His interest in economics and finance draw his attention towards the new emerging Blockchain Technology and Cryptocurrency markets. He is continuously in a learning process and keeps himself motivated by sharing his acquired knowledge. In free time he reads thriller fictions novels and sometimes explore his culinary skills.
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You have successfully joined our subscriber list.BlackRockused tokenized shares from one of its money market funds as collateral in a derivatives transaction with Barclays, leveraging JPMorgan’snewly introduced Tokenized Collateral Network (TCN), a blockchain-driven collateral settlement platform, per a Bloombergreporton Oct. 11. Tyrone Lobban, the head of Onyx Digital Assets at JPMorgan, emphasized that the transactions were “instantaneous,” eliminating the delays associated with the traditional methods. He further noted that when this technology is deployed on a larger scale, it has the potential to enhance efficiency by unlocking capital for use as collateral in ongoing transactions. According to the report, the bank plans to broaden its supported assets to include equities and fixed income. Ed Bond, the head of trading services at JPMorgan, reportedly said: “Institutions on the network can use a wider scope of assets to meet any collateral requirements they have on the back of trading” Bond further revealed that the bank has a pipeline of clients and transactions that would be testing its novel application. Meanwhile, the BlackRock-Barclay transaction marks a unique occasion in which a bank-developed blockchain application is being brought to market, following years of scrutiny regarding the effectiveness of blockchain technology in the wider financial industry. Over the years, several traditional financial firms have made different forays into the emerging sector to different degrees of success. Blockchain in banking This BlackRock-Barclays transaction is part of a growing trend that has seen some traditional financial institutions become more open to implementing blockchain technology. Last month, the London Stock Exchange (LSE) Group unveiledits groundbreaking blockchain-based trading platform for traditional financial assets. In this regard, the exchange a pioneer among major global stock markets. Earlier this year, Swift, a prominent network for banking communications, discloseda collaborative initiative with Chainlink (LINK) and other financial institutions. Their joint effort resulted in a successful tokenization experiment involving the seamless transfer of tokens across multiple blockchain networks. The post BlackRock leverages JPMorgan’s new blockchain tools for instant collateral settlement with Barclay’sappeared first on CryptoSlate.
