JPMorgan's Tokenized Collateral Network Facilitates Blackrock-Barclays Trade

Banking giant JPMorgan Chase has debuted its blockchain-based collateral settlement system. Blackrock became the first client to use JPMorgan’s Tokenized Collateral Network (TCN). The world’s largest asset manager used the system to convert shares in one of its money market funds into digital tokens, which it then used as collateral in an over-the-counter derivatives trade with Barclays Plc.

JPMorgan Debuts Tokenized Collateral Network

JPMorgan Chase & Co. has completed its first blockchain-based collateral settlement for clients, Bloomberg reported Wednesday. Tyrone Lobban, head of Onyx Digital Assets at JPMorgan, revealed in an interview that Blackrock, the world’s largest asset manager, utilized JPMorgan’s Tokenized Collateral Network (TCN) to convert shares from one of its money market funds into digital tokens. These digital tokens were subsequently used as collateral in an over-the-counter derivatives trade with Barclays Plc.

“Blackrock and Barclays are now live on TCN, an application which sits on J.P. Morgan’s Onyx Digital Assets platform, operating as a private blockchain which is used for tokenized asset movements including collateral settlements,” the banking giant’s press release details. JPMorgan described on its website:

Tokenized Collateral Network (TCN) is an application enabling investors to utilize assets as collateral. Transfer collateral ownership without moving assets in underlying ledgers — while remaining invested — starting with money market funds.

Lobban explained that JPMorgan’s blockchain network, Onyx Digital Assets, facilitated nearly instantaneous collateral transfers, adding that when deployed at scale, this technology would increase efficiency by unlocking tied-up capital, making it available as collateral in ongoing transactions. JPMorgan tested TCN using an internal transaction in May.

Ed Bond, JPMorgan’s Head of Trading Services, pointed out that the bank also plans to use the application to enable clients to utilize a broader range of assets as collateral, including equities and fixed income. Noting that the bank already has a pipeline of other clients and transactions for TCN, the executive emphasized:

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

Tom McGrath, deputy Global Chief Operating Officer of the Cash Management Group at Blackrock, commented: “Money market funds play an important role in providing liquidity to investors in times of high market volatility.” He added:

The tokenization of money market fund shares as collateral in clearing and margining transactions would dramatically reduce the operational friction in meeting margin calls when segments of the market face acute margin pressures.