By
Temitope Olatunji
April 26th, 2024
As JPMorgan has explained, it believes that integrating DeFi products will further grant its institutional clients more connections to the digital assets world.
JPMorgan Chase & Co (NYSE: JPM) has been looking for ways for decentralized finance (DeFi) developers to leverage the yield-generating potential of non-crypto assets. According to the bank, it has found the solution. Speaking at CoinDesk’s Consensus 2022 conference in Austin, Texas, JPMorgan has revealed that its blockchain business unit Onyx aims to bring trillions of dollars in tokenized assets to DeFi.
Tyrone Lobban, head of Onyx Digital Assets JPMorgan, said:
“Over time, we think tokenizing US Treasurys or money market fund shares, for example, means these could all potentially be used as collateral in DeFi pools. The overall goal is to bring these trillions of dollars of assets into DeFi, so that we can use these new mechanisms for trading, borrowing [and] lending, but with the scale of institutional assets.”
Onyx Digital Assets is a platform that helps financial services providers exchange different kinds of valuable assets without digging into their own cash reserves. It is implementing a strategy that consists of two parts. Firstly, it is using blockchain for collateral settlements. Last month, it completed the first transaction of the friction-less transfer of collateral assets. In particular, the transaction included tokenized versions of BlackRock’s money market fund shares, a kind of mutual fund invested in cash, and highly liquid short-term debt instruments.
Secondly, JPMorgan is participating in the pilot of “Project Guardian” along with DBS Bank and Marketnode. The project tests institutional-friendly DeFi using permissioned liquidity pools that consist of tokenized bonds and deposits.
According to Tyrone Lobban, JPMorgan strongly believes in DeFi potential. In addition to that, the bank has been looking into digital identity, in terms of blockchain and digital assets, for years. The company’s aim is to put an identity layer to enable KYC-based access, which will allow protocols to support institutions “naturally” without having to make too many changes in the way they work.
Tyrone Lobban added:
“If we can put this identity layer in front of DeFi that enables KYC-based access, then each of those protocols should just naturally be able to support institutions without necessarily having to make too many changes to what they’re doing. Do we have to set up separate permissioned pools and make changes to the existing protocols? Or can these things work out of the box?”
JPMorgan believes that integrating DeFi products will further grant its institutional clients more connections to the digital assets world. As the company has said, it wants to expand the eligibility criteria of the Onyx platform beyond the US bond market.