JPMorgan's Tokenized Collateral Network (TCN), a blockchain-based collateral settlement application, has reportedly gone live by completing its first transaction involving the clients BlackRock and Barclays.
BlackRock used TCN to convert shares in one of its money market funds into digital tokens, which were then transferred to Barclays as collateral for an over-the-counter derivatives trade between the two institutions, Bloomberg reported, citing an interview with Tyrone Lobban, head of Onyx Digital Assets at JPMorgan.
JPMorgan first internally tested TCN in May 2022, when it transferred tokenized representations of shares from a BlackRock money market fund to serve as collateral on its private blockchain platform Onyx Digital Assets. Now that TCN is live, JPMorgan has a pipeline of other clients and transactions, Ed Bond, head of trading services at JPMorgan, told Bloomberg.
TCN helps move collateral almost instantly, much quicker than the usual day-long process, according to Lobban. If implemented on a larger scale, the application could boost efficiency by making locked-up capital available for use as collateral in ongoing transactions, Lobban said.
TCN to use diverse collateral assets
While TCN is initially focused on money market funds, it reportedly will look to add support for other assets as collateral, including equities and fixed income.
Asset tokenization is believed to lead to quicker transactions. It's like skipping the step of converting your paper money into coins when you want to use a vending machine — you can use tokens directly and get your snack faster.
JPMorgan also runs a blockchain-based payment system called JPM Coin. JPM Coin operates beyond standard banking hours and is faster, thus helping clients initiate payments just before they are due. JPM Coin recently added support for euro transactions in addition to its existing U.S. dollar support.
© 2023 The Block. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.