Wall Street banking giant JPMorgan Chase has debuted its blockchain collateral settlement solution called Tokenized Collateral Network (TCN), with asset management BlackRock being one of the tool’s first adopters, Bloomberg reported on Oct. 11.

TCN allows investors to use assets as collateral without transferring them into underlying ledgers via blockchain technology.

Tyrone Lobban, head of Onyx Digital Assets at JPMorgan, told Bloomberg that BlackRock used TCN to convert shares in one of its money market funds into digital tokens. These tokens were then transferred to British banking giant Barclays as collateral for an over-the-counter derivatives trade between the two parties.

The executive claimed that the transfer of collateral was nearly immediate, adding the new solution will increase efficiency by unlocking capital for use as collateral in ongoing transactions.

Meanwhile, JPMorgan’s head of trading services, Ed Bond, said the bank plans to let clients use other assets, such as equities and fixed income, as collateral through TCN.

The first internal test of TCN was conducted by JPMorgan in May 2022, and according to Bond, there is now a pipeline of other clients and transactions now that TCN is live.

Blockchain proponents have long argued that the technology will make it easier for financial institutions to use their shares in money-market funds as collateral. Since assets would be tokenized, these enterprises would no longer need to redeem them for cash. Tom McGrath, deputy global chief operating officer of the cash management group at Blackrock, said:

“The tokenization of money market fund shares as collateral in clearing and margining transactions would dramatically reduce the operational friction in meeting margin calls when segments of the market face acute margin pressures.” 

Once a blockchain and crypto skeptic, JPMorgan has been actively involved in developing services based on decentralization. In 2019, JPMorgan introduced JPM Coin, a blockchain-based system for internal movement of euros and dollars by corporate clients. The company also runs a blockchain-based repo collection and was reportedly exploring a digital deposit token to expedite cross-border settlements.

In June, the bank used a blockchain-based solution to settle trades with Indian banks.

Meanwhile, rival Goldman Sachs has also been busy launching its own blockchain-based initiatives. In November 2022, the bank unveiled its digital asset platform to enable clients to issue financial securities in the form of digital assets in areas such as real estate.