Wall Street banking giant JPMorgan Chase is testing a blockchain use case for collateral settlements in after-hours trading.
Big banks are making moves into the blockchain and crypto space at a greater pace now more than ever. JPMorgan is the latest to experiment with distributed ledger technology to improve transfer efficiency.
On May 26, Bloomberg reported that the Wall Street bank ran a pilot test transfer last week involving a transfer of a token representation of BlackRock money market fund shares as collateral on its private blockchain.
According to the company, the system will allow investors to use a broader range of assets as collateral and make settlements when markets are closed.
After-Hours Blockchain Trading
JPMorgan’s global head of trading services, Ben Challice, told the outlet “what we’ve achieved is the friction-less transfer of collateral assets on an instantaneous basis,”
The bank stated that transactions involving derivatives, repo trading, and securities lending could all be settled on the blockchain. It added that there are plans to expand tokenized collateral to include equities, fixed income, and other asset types.
It is also possible that the blockchain network may be expanded to serve as a bridge to decentralized finance (DeFi) protocols for institutional investors, according to Tyrone Lobban, head of the firm’s Blockchain Launch and Onyx Digital Assets (ODA). He stated that as crypto adoption increases:
“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 uses its own permissioned blockchain platform called Onyx, commissioned in 2020. The bank claims it has pioneered the world’s first blockchain-based platform for wholesale payment transactions.
The bank began harnessing blockchain technology in 2020 when it used DLT to conduct intraday repurchases. Since then, more than $300 billion of repo transactions have been processed on the network, according to Bloomberg.
Big Blockchain Investments
In March, JPMorgan invested an undisclosed sum into the blockchain organization TRM Labs. The California-based firm assists crypto-focused businesses, monetary institutions, and public agencies in investigating and managing fraud and financial crimes.
Furthermore, analysts at the bank are still bullish on Bitcoin and crypto-assets. In a note released to investors this week, JPM strategists said that Bitcoin’s fair value is closer to $38,000 than its current level.
They also noted that crypto assets are one of the bank’s preferred alternative assets over real estate as they do not fall into the same category as stocks and bonds.