- JPMorgan has conducted its first commercial transaction on its Tokenized Collateral Network, called Onyx
- Onyx used blockchain technology to facilitate a collateral settlement between BlackRock and Barclays
- Introduced by JPMorgan last year, Onyx has the potential to streamline financial transactions and has garnered interest from several major banks and institutions
JPMorgan has taken a significant step in utilizing blockchain technology for commercial purposes after conducting the first transaction on Onyx, its Tokenized Collateral Network (TCN). Onyx was employed for the first time to facilitate a collateral settlement between global investment giant BlackRock and Barclays Bank, with the transfer seeing the conversion of shares from one of BlackRock’s money market funds into digital tokens. These tokens were subsequently transferred to Barclays to serve as collateral for an over-the-counter derivatives trade between the two financial institutions.
Collateral Transactions Cut From Hours to Seconds
JPMorgan announced Onyx last year, with several large banks and other institutions signing up for the scheme. This is in addition to its Interbank Information Network (IIN) which uses the bank’s own digital currency, JPMCoin, running on the Quorum blockchain, a permissioned version of Ethereum.
According to Tyrone Lobban, the Head of Onyx Digital Assets at JPMorgan, the blockchain network’s implementation allowed for almost instantaneous collateral movement, compared to the typical day-long process. At scale, this technology could significantly enhance efficiency by unlocking capital tied up as collateral for use in ongoing transactions.
JPMorgan aims to expand the application to include a wider range of assets as collateral, including equities and fixed-income securities. This extension will offer institutions on the network the flexibility to meet their specific collateral requirements as needed for their trading activities.
With the application now live, the bank has a pipeline of prospective clients and transactions waiting to use the technology. JPMorgan previously conducted an internal transaction test using Onyx last year, which paved the way for this successful commercial implementation.
Blockchain Finally Finding its Feet
Blockchain enthusiasts argue that using this technology can simplify the use of money market fund shares as collateral for financial institutions. This would eliminate the need to redeem them for cash, as is customary in traditional processes, making transactions faster and potentially reducing risks during times of market stress.
Onyx’s successful commercial application demonstrates the tangible potential of blockchain technology within the financial sector. While Wall Street firms have spent the past decade experimenting with blockchain to simplify various complex processes, the limited number of applications in actual use has led some critics to question its real utility in finance, something that JPMorgan appears to have finally conquered.
