Fidelity International has selected JPMorgan’s Onyx Digital Assets blockchain to tokenize a money market fund.
The move means improved efficiency in delivering margin requirements and a reduction in transaction costs and operational risk, Fidelity International said.
Fidelity International, a London-based funds management firm, has tokenized shares in a money market fund (MMF) using JPMorgan’s Ethereum-based private blockchain network, Onyx Digital Assets.
Tokenization occurred near instantaneously through 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 collateral provider on the bank’s Onyx blockchain, said Fidelity International, which is a separate entity to U.S.-based Fidelity Management and Research.
Tokenization of traditional financial assets has become a priority for banks, and it’s an area JPMorgan has been working on for some years. The essence of tokenization is to create on a blockchain a virtual investment vehicle representing real-world assets such as real estate, precious metals and collectibles. Stocks and bonds work too.
Fidelity International also has a long history with digital assets and worked on a tokenization project with Swiss bank Sygnum back in 2019.
In October last year, JPMorgan carried out its first live blockchain-based collateral settlement transaction involving tokenized shares in a BlackRock money-market fund. The shares were transferred to Barclays for collateral in an over-the-counter derivatives trade. BlackRock has gone on to further embrace tokenization through its public-facing BUIDL project, with tokenization services firm Securitize.
“Tokenizing our money market fund shares to use as collateral is an important and natural first step in scaling our adoption of this technology,” Stephen Whyman, Fidelity International’s head of debt capital markets, said in an email interview. “The benefits to our clients and the wider financial system are clear; in particular, the improved efficiency in delivering margin requirements and reduction in transaction costs and operational risk.”
JPMorgan’s TCN started with the tokenization of money market shares, 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 onto our network through tokenization, adding a new asset that is otherwise prohibitively complex to use across today’s collateral landscape,” said Keerthi Moudgal, head of product at Onyx Digital Assets, JP Morgan, via email.