Blockchain
Fidelity International Tokenizes a Money Market Fund on JPMorgan’s Blockchain
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 business) and the Tokenized Collateral Network, an application that sits between a recipient and a collateral provider on the blockchain The bank’s Onyx, said Fidelity International, which is a separate entity from U.S.-based Fidelity Management and Research.
Tokenization of traditional financial assets has become a priority for banks, and it’s an area that JPMorgan has been working on for a few 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. Actions e bonds work too.
Fidelity International also has a long history with digital assets, most recently working on a tokenization project with a Swiss bank Sygnum in March.
In October last year, JPMorgan did its first blockchain-based collateral settlement transaction involving tokenized shares in a BlackRock money market fund. The shares were transferred to Barclays as collateral in an over-the-counter derivatives transaction. BlackRock has continued to further embrace tokenization by addressing the public BUIDL projectwith tokenization services company Securitize.
“Tokenizing our money market fund shares for use as collateral is an important and natural first step in broadening our adoption of this technology,” said Stephen Whyman, head of debt capital markets at Fidelity International, in an email interview via email. “The benefits for our customers and for the financial system in general are clear; in particular, improving efficiency in meeting margin requirements and reducing transaction costs and operational risk.”
JPMorgan’s TCN began with the tokenization of money market equities, a type of mutual fund that invests in high-quality short-term debt instruments and cash equivalents. The plan is to expand across equities, fixed income and a range of asset classes, the bank said.
“Fidelity’s participation in TCN brings its MMF units to our network through tokenization, adding a new asset that would otherwise be prohibitively complex to use in today’s collateral landscape,” said Keerthi Moudgal, head of product at Onyx Digital Assets, JP Morgan, via email.
CORRECTION (June 10, 2:26 pm UTC): Corrects project date with Sygnum in fourth paragraph. An earlier version of this story placed it in 2019.