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Fidelity International tokenizes money market fund on JPMorgan blockchain
Fidelity International, a London-based fund management company, has tokenized shares in a money market fund (MMF) using JPMorgan’s private Ethereum-based blockchain network, Onyx Digital Assets.
Tokenization happened almost instantly thanks to connectivity between the fund’s transfer agent (JPMorgan’s transfer agency business) and Tokenized Collateral Network, an application that sits between a collateral receiver and a provider collateral on the bank’s Onyx blockchain, said Fidelity International, which is a separate entity for U.S.-based Fidelity Management and Research.
Tokenization of traditional financial assets became a priority to banks, and this is an area that JPMorgan has been working on for several years. The essence of tokenization is to create a virtual investment vehicle on a blockchain representing real-world assets such as real estate, precious metals, and collectibles. Actions and obligations work too.
Fidelity International also has a long history in digital assets and recently worked on a tokenization project with a Swiss bank. Sygnum in March.
In October last year, JPMorgan achieved its first blockchain-based live 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 continued to further embrace tokenization through its public offering BUIDL projectwith tokenization services company Securitize.
“Tokenizing our money market fund shares for use as collateral is an important and natural first step in adopting this technology,” Stephen Whyman, head of debt capital markets at Fidelity International, said in an email interview. “The benefits for our clients and the financial system as a whole are clear; in particular, improved efficiency in meeting margin requirements and reduced transaction costs and operational risk.
JPMorgan’s TCN began with the tokenization of money market stocks, a type of mutual fund that invests in high-quality short-term debt instruments and cash equivalents. The plan is to expand into equities, fixed income and a range of asset classes, the bank said.
“Fidelity’s stake in TCN brings its MMF units to our network via tokenization, adding a new asset that would otherwise be prohibitively complex to use in today’s collateral landscape,” said Keerthi Moudgal, Product Manager at Onyx Digital Assets, JP Morgan, via email.
CORRECTION (June 10, 2:26 p.m. UTC): Corrects project date with Sygnum in fourth paragraph. An earlier version of this story placed it in 2019.