Digital assets: JPM executes blockchain-based collateral settlement for OTC derivatives

J.P. Morgan has facilitated its first blockchain-based collateral settlement for a live client over-the-counter (OTC) derivative transaction.

This first transaction with BlackRock and Barclays demonstrates the power of tokenised assets, particularly in a collateral setting - Ed Bond, J.P. Morgan

BlackRock tokenised the representation of shares in a money market fund (MMF) through J.P. Morgan’s Tokenized Collateral Network (TCN), an application which sits on the US banking giant’s Onyx Digital Assets platform. Then the tokenised representation of the MMF shares were transferred to Barclays to cover collateral requirements, according to a J.P. Morgan statement provided to SRP.

Using blockchain settlement technology to transfer the ownership of MMF shares will add utility to MMFs and potentially increase their resiliency, the bank stated.

The transfer between Blackrock and Barclays was ‘near instantaneous’ and represents a first for BlackRock, J.P. Morgan and Barclays, where the shares in MMFs are used as ‘collateral between bi-lateral derivatives counterparts’.

‘This first transaction with BlackRock and Barclays demonstrates the power of tokenised assets, particularly in a collateral setting,’ said Ed Bond (pictured), J.P. Morgan’s head of trading services. ‘MMFs can now be mobilised and utilised in a more efficient way, unlocking new pools of liquidity to be used for margining.’

Bond also noted that this transaction demonstrates ‘the power of tokenised assets, particularly in a collateral setting’.

‘MMFs can now be mobilised and utilised in a more efficient way, unlocking new pools of liquidity to be used for margining,’ he said.

‘The tokenisation 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,’ adds Tom McGrath, deputy global chief operating officer of the cash management group at BlackRock.

J.P. Morgan stated it sees this transaction act as a ‘blueprint for the future.’ According to its statement, TCN has started with the tokenisation of money market shares, with a view to expanding across equities, fixed income and a range of asset classes.

The ability to tokenise assets and use them under both title transfer and pledge structures, outside of any limiting market operating hours has ‘the potential to fundamentally change the collateral market,’ the statement read.

UBS leverages expertise in tokenising structured products, deploys first tokenised VCC

UBS Asset Management has launched its first live pilot of a tokenised Variable Capital Company (VCC) fund on the Ethereum blockchain.

The pilot allows UBS Asset Management to test various activities, including fund subscriptions and redemption, according to the investment manager’s announcement.

‘This is a key milestone in understanding the tokenisation of funds, building on UBS’s expertise in tokenising bonds and structured products,’ Thomas Kaegi (right), head of UBS Asset Management, Singapore & Southeast Asia, said in the statement.

The fund is part of a wider VCC umbrella designed to bring various real-world assets on-chain as part of Project Guardian, a collaborative industry initiative led by the Monetary Authority of Singapore (MAS).

Kaegi noted that the ‘exploratory initiative’ aims to work with traditional financial institutions and fintech providers to ‘help understand how to improve market liquidity and market access for clients.’

The latest development came after it originated CNY200m (US$27.4m) of fully digital structured notes for a third-party issuer.

Fig gets approval to launch crypto structured note platform

Canada-based Fig Investments has received exemptive relief from the Alberta Securities Commission (ASC) and British Columbia Securities Commission (BCSC) to permit the distribution of its crypto structured investment products to accredited investors, according to its announcement.

The ‘first-of-its-kind’ exemptive relief granted by the ASC and BCSC will allow Fig to test its platform with accredited investors in Alberta, British Columbia and eligible foreign jurisdictions, the firm stated. If the pilot is successful, Fig intends to register as a portfolio manager and exempt market dealer in Canadian jurisdictions to allow for broader distribution of its products.

Its platform enables ‘instant access’ to structured notes with customisable risk and return parameters that provide hedged exposure to price movement in the Bitcoin (BTC) and ETH markets.

Fig Investments' initial focus will be on crypto structured investment products, with a long-term goal of expanding to equity structured products and digital representations of all asset classes. Its ultimate goal is to seek to introduce the blockchain-based settlement protocol for bilateral OTC option contracts, according to the firm.

‘Our platform leverages technology to offer hyper-customizable products with turnaround in minutes instead of days, with a vision of democratising access to investment opportunities that were previously inaccessible to most investors,’ said Guanzhi Ma (right), co-founder and CEO of Fig Investments.

21Shares debuts MakerDAO ETPs

21Shares has unveiled a new crypto ETP providing directly backed exposure to MKR, the governance token of the decentralised lending platform MakerDAO.

With an inception date of 27 September, the ETP is listed on BX Swiss with an expense ratio (TER) of 2.5%, according to the product's factsheet released by the Swiss crypto ETP provider. The ETP has been also listed on Euronext Amsterdam in US dollars, and on Euronext Paris in euros.

MakerDAO is a decentralized finance (DeFi) platform that was launched in 2017 on the Ethereum blockchain. It was developed to allow any user to take out loans in its stablecoin, DAI, without the need for credit checks, by depositing other cryptocurrencies as collateral.

The platform aims to solve several issues found in traditional finance such as transparency, volatility, and centralization. It utilizes smart contracts to eliminate the need for trust in any party, replacing external audits and company statements with trackability via the blockchain.

The new listing follows the launch of the 21Shares Lido DAO ETP (LIDO) in June.

IPOR Labs rolls out a suite of yield-focused and interest-rate derivatives products to DeFi

IPOR Labs AG, the Zug-based creator of blockchain-based derivatives software, announced on Thursday (12 October) the launch of IPOR Protocol v2, which introduces a suite of yield-focused and interest rate derivatives products to decentralised finance (DeFi)

The upgrade enables IPOR to tap into the US$19 billion Ethereum liquid staking derivatives market offering stETH deposit pools and staking rate swap instruments for various tenors, its announcement stated.

With its new stETH pool and on-chain interest rate derivatives, the IPOR v2 allows investors to hedge staking rate volatility via Stake Rate Swaps (SRS), the vanilla swap contracts for stETH staking rates.

Participants holding Ethereum's native cryptocurrency Ether (ETH), wETH, or stETH can boost their staking yields and provide the liquidity the IPOR Protocol requires to begin underwriting the SRS markets, according to IPOR Labs.

IPOR v2 is a rolling release with several upcoming products that will be launched in the next three quarters, the developer said. After the initial upgrade, the Stake Rate Swaps will be launched, followed by fixed-rate lending and borrowing, leveraged borrowing against IPOR LP tokens, and a real-world assets bridge that can capture yields from either DeFi or traditional finance (TradFi).