JP Morgan employs blockchain technology for collateral settlement

JP Morgan Chase announced yesterday the development of a blockchain collateral management system for traditional finance. It completed its first transaction last week by tokenizing BlackRock money market fund shares and using them as security. This is the most recent solution from the company’s Onyx blockchain and digital assets business.

“What we’ve achieved is the frictionless transfer of collateral assets on an instantaneous basis,” said Ben Challice, JPMorgan’s global head of trading services. While the asset in this case was a money market fund, it intends to tokenize equities, fixed income, and other asset types on its business blockchain network in the future. Although BlackRock was not a counterparty, it was extensively involved and is interested in the technology. It also allows collateral to be managed outside of the traditional trading house.

“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,” added Challice.

This is not the first time blockchain has been used for collateral management, but Challice’s comments suggest that use cases may spread beyond solely interbank applications.

JPM Coin, interbank payments, including its Partior joint venture, and repo trading are all in production within JP Morgan’s Onyx division.