Bringing blockchain to collateral markets for the first time, J.P. Morgan has completed a landmark transaction on Kinexys Digital Assets using tokenized ownership interests in Money Market Fund (MMF) shares as collateral. The development answers an industry-wide appetite for frictionless transfer of collateral ownership without the hassle of moving assets using traditional means.

The launch of the Tokenized Collateral Network (TCN) application utilizes the blockchain to enable the transfer of tokenized ownership interests in MMF shares for the first time. The application has the potential to drastically reduce settlement fails, provide near-instantaneous real-time change of ownership, as well as release assets trapped at recordkeeping agents to help participants maximize utilization across their assets.

Using TCN, asset managers and institutional investors can now efficiently pledge or transfer ownership MMF shares as collateral.

The new application will bring ultra-mobility to the collateral market - reducing friction and cost and bringing additional utility to assets previously unavailable to use as collateral.

Changing the game

J.P. Morgan has been a proponent of blockchain technology and, in recent years, increasingly embraced digital assets. Over time, Kinexys could potentially be a bridge that connects institutional investors with decentralized finance platforms in the crypto economy, according to Tyrone Lobban, head of Kinexys Blockchain Launch and Kinexys Digital Assets. “With Kinexys Digital Assets we’ve created a tokenization platform that will ultimately enable trillions of dollars of traditional assets to be brought into the broader blockchain ecosystem - not only solving real-world financial services problems, but also providing an institutional scale Ethereum Virtual Machine-based chain that is compatible with the innovation of DeFi.”

Since Kinexys was established in 2020, the Kinexys Digital Assets platform has also facilitated intraday repurchase, or repo, transactions in order to provide short-term borrowing in fixed income through the exchange of cash for tokenized collateral. To date, more than $300 billion of these repo transactions have been processed on the network.

The Kinexys Digital Assets platform provides the blockchain infrastructure and breadth of resources to bring a unique variety of asset tokenization use cases to life and supports application development through every stage of the journey. 

Both TCN and Intraday Repo applications plan to expand their offerings across equities, fixed income and a range of asset classes in the coming months.