Financial services behemoth JPMorgan is contemplating tokenizing equities and other traditional securities using blockchain technology.
According to a new report by Bloomberg, the banking giant is experimenting with blockchain technology by using it to transfer collateral settlements during the after-hours of the market.
On May 20, JPMorgan transferred the token representation of $10 trillion to asset management firm BlackRock’s money market fund shares as collateral on its private blockchain. JPMorgan told Bloomberg that this effort “will allow investors to pledge a wider range of assets as collateral and use them outside of market operating hours.”
A collateral settlement is when two parties exchange assets in order to reduce the credit risk associated with unsecured financial transactions that occur between them.
Ben Challice, JPMorgan’s global head of trading services, told Bloomberg in an interview that with this move, the bank has managed to instantly move a collateral asset without trouble.
“What we’ve achieved is the friction-less transfer of collateral assets on an instantaneous basis.”
Chalice notes that BlackRock, while not a counterparty to the transaction, is also exploring the use of blockchain technology for collateralization.
JPMorgan says that it plans to ramp up its use of collateralized settlements in the coming months, incorporating them into derivatives and repo trading, securities lending, as well as expanding tokenized collaterals to include equities and fixed income.
Earlier this week, the bank said that crypto assets are replacing real estate as its “preferred alternative asset class.”
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