JPMorgan conducts a pilot test for blockchain-based collateral settlements

• JPMorgan said that it will allow investors to pledge a wide range of assets as collateral, via its private blockchain.
• JPMorgan’s blockchain network serves as a bridge connecting institutional investors and decentralized finance (DeFi) platforms in the crypto economy.

Last week on May 20, Wall Street banking giant JPMorgan successfully conducted a pilot test for collateral settlements over its private blockchain network. The company is reportedly leveraging its blockchain platform for trading traditional financial assets.

Last week, two of JPMorgan’s entities transferred the token representation of BlackRock Inc. Money market fund shares as collateral using its private blockchain network. The banking giant said that this experiment will allow investors to pledge a wide range of assets as collateral. Besides, they can also use them outside the operating market hours.

Blockchain-based collateral settlements are possible with transacting derivatives, repo trading, as well as securities lending. JPMorgan said that it will expand this collateral settlement offering to equities, fixed income, as well as other asset classes.

In an interview with Bloomberg, Ben Challice, JPMorgan’s global head of trading services, said:

What we’ve achieved is the friction-less transfer of collateral assets on an instantaneous basis. While BlackRock wasn’t a counterparty, they have been heavily involved since Day One, and are exploring use of this technology.

JPMorgan’s experiment with blockchain and crypto

Wall Street banking giant JPMorgan has been actively involved in the blockchain and crypto space over the past few years. Back in 2020, the banking giant also founded the Onyx Digital Assets (ODA). Besides, the bank also has its native private blockchain network with native crypto JPMCoin.

Tyrone Lobban, head of JPMorgan’s Blockchain Launch and Onyx Digital Assets said that its blockchain serves as a bridge connecting institutional investors and decentralized finance (DeFi) platforms in the crypto economy. He added:

As the crypto sector grows over time, “there will be a growing set of financial activities that happen on the public blockchain, so we want to make sure that we are able to not only support that but also be ready to provide related-services”.

JPMorgan’s blockchain and ODA platform have been used by several banks to conduct tokenized fixed income market trading. So far, the blockchain platform has facilitated more than $300 billion of repo transactions. Some of the biggest banking institutions participating are BNP Paribas SA and Goldman Sachs Group Inc.

Some of the biggest financial institutions like Goldman and BlackRock are also working on the tokenization of the traditional asset classes. These financial institutions are exploring the use of blockchain in different use cases such as mortgage loans, interbank payments, and cross-border trades.

Earlier this month, JPMorgan also unveiled a blockchain that can withstand attacks from quantum computing. There has been a growing concern that quantum computing holds the power to break the blockchain network.