JPMorgan has begun to use blockchain technology for collateral settlements, performing a pilot transaction last Friday. The transaction took place when two of its entities transferred the token representation of BlackRock Inc. money market fund shares as collateral on its private blockchain.

“What we’ve achieved is the friction-less transfer of collateral assets on an instantaneous basis,” Ben Challice, JPMorgan’s global head of trading services, said in an interview. While BlackRock wasn’t a counterparty, “they have been heavily involved since Day One, and are exploring the use of this technology.” 

Blockchain-based collateral settlement can be used for transactions such as derivatives and repo trading, as well as securities lending. The innovation will allow investors to use a wider range of assets as collateral and carry out transactions outside of market hours. In the coming months, JPMorgan also plans to expand tokenized collaterals to include equities, fixed income, and other asset types.

This is not JPMorgan’s first foray into blockchain technology. In 2016, JPMorgan launched Quorum, an enterprise version of Ethereum, which was acquired by ConsenSys in August 2020. Following the sale, JPMorgan launched a new internal blockchain called Onyx and its own internal stablecoin in October 2020.

The bank‘s first use of blockchain for transactions was related to purchase burrowing in 2020. According to Bloomberg, more than $300 billion of value has been handled through those transactions, some of which involved Goldman Sachs and BNP Paribas SA.

As the crypto sector grows over time, Ben Challice says: “there will be a growing set of financial activities that happen on the public blockchain, so we want to make sure that we are able to not only support that but also be ready to provide related services.”