JPMorgan Launches Tokenized Collateral Network
JPMorgan introduces a new digital system, TCN, changing how assets are used in secure trades, enhancing speed and safety in transactions.
On October 11, big US bank JPMorgan launched a new system called the Tokenized Collateral Network (TCN), which uses blockchain technology, a secure online record-keeping method. Bloomberg reported that the TCN helps investors use their assets (like money or property) as collateral in a new, digital way. It's like turning assets into special online tokens, which can be used in trades without actually moving the original assets from their safe spots.
In a first-of-its-kind trade using TCN, JPMorgan and big asset manager BlackRock turned shares from a money market fund into digital tokens. These tokens were then sent to Barclays bank as security for a special kind of trade, known as an over-the-counter derivatives exchange.
JPMorgan first tested the TCN system internally in May 2022 and has now brought it into the real world to make the process of traditional settlements more streamlined and scalable using blockchain technology. This means the process becomes quicker, more secure, and works more smoothly.
Tyrone Lobban, who leads Onyx Digital Assets at JPMorgan, says the new TCN platform frees up capital, letting it be used as collateral (a kind of security) in ongoing transactions. It enhances efficiency on a big scale, allowing the creation, transfer, and settling of tokenized traditional assets. The system allows collateral to move almost instantly, which is a big step forward compared to older methods.
Using TCN, clients can get to liquidity (available cash) faster through a protected repo transaction, using these new tokenized collateral instead of relying on costlier unsecured credit lines. External clients, those outside of JPMorgan, who agree to trade using the blockchain, have their own node (a part of the blockchain network) where they can settle trades and view reports.
Despite its initial skepticism towards blockchain, JPMorgan has now fully embraced the technology, actively testing and launching different services centered around blockchain and cryptocurrency due to increasing demand. In June, the bank even used a blockchain-based solution for settling trades with banks in India.
