IMPORTANT POINTS:
- Fidelity International has tokenized shares of a money market fund using JPMorgan’s Onyx blockchain.
- Tokenization improves efficiency and reduces transaction costs and operational risk.
- JPMorgan plans to expand tokenization across various asset classes.
Fidelity International, a London-based fund management firm, has tokenized shares of a money market fund (MMF) using JPMorgan’s private Ethereum-based blockchain network, Onyx Digital Assets.
Tokenization occurred almost instantly through connectivity between the fund’s transfer agent (JPMorgan’s transfer agency) and the Tokenized Collateral Network, an application that sits between a collateral recipient and a collateral provider on the company’s Onyx blockchain. bank, according to Fidelity International, which is a separate entity from Fidelity Management and Research based in the United States.
Tokenization of traditional financial assets has become a priority for banks, and is an area that JPMorgan has been working on for some years. The essence of tokenization is to create a virtual investment vehicle on a blockchain that represents real-world assets , such as real estate, precious metals, and collectibles. Stocks and bonds work too.
History with digital assets
Fidelity International also has a long history with digital assets and worked on a tokenization project with Swiss bank Sygnum in 2019.
In October last year, JPMorgan conducted its first live blockchain-based collateral settlement transaction, which involved tokenized shares in a BlackRock money market fund. The shares were later transferred to Barclays as collateral in an over-the-counter derivatives transaction. Since then, BlackRock has continued to embrace tokenization through its public project BUIDL, as well as collaborating with tokenization services firm Securitize. Therefore, this advance shows how large institutions are integrating innovative technologies to improve their financial processes.
“Tokenizing our money market fund shares for use as collateral is an important and natural first step in expanding our adoption of this technology.
The benefits for our clients and the financial system in general are clear; in particular, greater efficiency in the delivery of margin requirements and the reduction of transaction costs and operational risk.”Stephen Whyman, head of debt capital markets at Fidelity International.
JPMorgan TCN Expansion
JPMorgan’s TCN began by tokenizing money market stocks, a type of mutual fund that invests in short-term debt instruments and high-quality cash equivalents. The plan is to expand across equities, fixed income and a variety of asset classes, according to the bank.
“Fidelity’s stake in TCN brings its MMF units to our network through tokenization, adding a new asset that would otherwise be prohibitively complex to use in the current collateral landscape.”Keerthi Moudgal, Head of Product at Onyx Digital Assets, JPMorgan.
