The tokenization-of-real-world-assets is seen by many as a practical and promising use-case for blockchain technology, and as an important input for the future of decentralized finance with broader applications. This took a big step forward this week with asset management firm BlackRock announcing it successfully tokenized and used as collateral shares of one of its money market funds (MMF) using JPMorgan's Ethereum-based private Onyx blockchain and the bank's Tokenized Collateral Network (TCN). The tokens were then transferred to Barclays Plc and posted as collateral for an over-the-counter derivatives trade.
In the context of this tokenization and transfer, the technology allowed the bank to add utility to its clients MMF investments by facilitating a much quicker and more cost-effective means of meeting margin requirements.
As reported by Bloomberg, Tom McGrath, Deputy Global COO of the Cash Management Group at BlackRock, described the benefits of the tokenization of MMF shares as collateral in clearing and margining transactions, stating that the technology "would dramatically reduce the operational friction in meeting margin calls when segments of the market face acute margin pressures." Other mainstream financial institutions are working on similar projects using the public Ethereum blockchain.
Why this is significant:
For those in the digital assets space, this success may be seen as a prologue and validation for tokenization-of-real-world-assets and the use of blockchain for significant financial transactions by major financial institutions.
JPMorgan Chase & Co. has gone live with its first collateral settlement for clients using blockchain, as the largest US bank by assets pushes ahead with commercial applications built on the technology at crypto's core.
This article is presented for informational purposes only and is not intended to constitute legal advice.
We operate a free-to-view policy, asking only that you register in order to read all of our content. Please login or register to view the rest of this article.