JPMorgan Debuts Tokenized BlackRock Shares as Collateral with Barclays

JPMorgan has carried out its first live blockchain-based collateral settlement transaction involving BlackRock and Barclays, the U.S. banking giant said on Wednesday.

JPMorgan’s Ethereum-based Onyx blockchain and the bank’s Tokenized Collateral Network (TCN) was used by BlackRock to tokenize shares in one of its money market funds. The tokens were then transferred to Barclays Plc for collateral in an OTC (over-the-counter) derivatives trade.

The tokenization of traditional financial assets is a big deal for banks, and it’s an area JPMorgan has been leading the charge with, now joined by the likes of Citi and others.

Tokenization occurred within a matter of minutes through connectivity between the fund’s Transfer Agent and TCN, JPMorgan said in a press release. The transfer between Blackrock and Barclays was near instantaneous and represents a first for BlackRock, J.P. Morgan and Barclays, where the shares in MMFs are used as collateral between bi-lateral derivatives counterparts, it said.

“Onyx Digital Assets already enables clients to access intraday liquidity via repo transactions,” said Tyrone Lobban, JPMorgan’s Head of Onyx Digital Assets, in a statement. “Now 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.”

Tom McGrath, Deputy Global COO of the Cash Management Group at BlackRock, 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.”