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JPMorgan Enables Clients to Use Tokenized Assets as Collateral

The financial giant has announced that its Tokenized Collateral Network is now live, with the first transaction taking place between BlackRock and Barclays.

JPMorgan TCN Onyx

Investment banking behemoth JPMorgan has gone live with its blockchain-based collateral settlement platform, TCN (or Tokenized Collateral Network), according to a report by Bloomberg.

This was marked by an inaugural transaction between BlackRock and Barclays. BlackRock tokenized some shares from one of its money market funds (MMF) using TCN., which were then transferred to Barclays and used as collateral for an over-the-counter derivatives trade.

The platform runs on JPM’s Ethereum-based Onyx blockchain, and has been in internal testing since May 2022.

According to JPMorgan’s head of trading services, Ed Bond, now that the TCN is live the bank has a pipeline of other clients waiting to use the service. In time it also intends to expand the range of assets that can be used as collateral, to include equities and fixed-income investments in addition to MMFs.

“Institutions on the network can use a wider scope of assets to meet any collateral requirements they have on the back of trading,” said Bond.

Head of Onyx Digital Assets at JPMorgan, Tyrone Lobban, explained that the use of the TCN meant that the collateral moved almost instantaneously, compared to existing systems, which can take an entire day. Lobban further added that the technology would increase efficiency at scale, by freeing locked capital to be used as collateral in ongoing transactions.

“…with the launch of TCN, clients can benefit from additional utility from their MMF investments by posting tokenized MMF shares as collateral – a faster, more cost-effective way of meeting margin requirements.”

JPMorgan is one of the major institutional players in the blockchain space, with its Onyx Digital Assets platform hosting an increasing number of services for clients. This is perhaps especially surprising considering CEO Jamie Dimon’s long-standing hostility towards bitcoin in particular and cryptocurrency in general.

As we Observed in March, JPM launched a pilot scheme to allow instant 24/7 clearing and settlement of U.S. dollar transactions by Indian banks in the new financial centre of Gujarat. The Onyx blockchain platform improved the efficiency of current systems, which are slow and only available during U.S. banking hours.

Onyx is also home to the investment bank's own cryptocurrency, JPM Coin, which expanded to include euro-denominated payments in June of this year.

However, JPM Coin aside, it still seems to be a case of blockchain yes, crypto no, as JPM’s UK consumer bank, Chase, last month announced that it would be blocking any payments that it suspected of being crypto-related… but only to protect its customers, of course.