The sixth largest bank in the world, JP Morgan Chase and Co. is designing a platform to enable instant settlement of securities on the Blockchain using the JPM coin according to reports.
The stablecoin JPM Coin was released in February this year and is backed by the US dollar at a 1:1 ratio.
Umar Farooq, head of digital treasury services and blockchain at JP Morgan commented,
“We believe that a lot of securities over time, in five to 20 years, will increasingly become digital or get tokenized,”
On the blockchain or JP Morgan deposit wallet, “seller’s bonds are represented by tokens,” these are then computed by the smart contracts which then yields the bond contracts. Hence, the US bank has primarily created a digital version of the security, called a Security Token in general terms.
A seller’s bonds are represented by tokens on the blockchain or JP Morgan deposit wallet. These are then computed by the smart contracts which then gives way to the bond contracts. In this way, the biggest bank of the US have essentially created a digital version of the security, commonly known as “Security Token”.
Shuichi Ohsaki, Chief rates strategist at Bank of America Merrill Lynch attended the conference held in Tokyo. He cited the slow transaction speed for settlement of such transactions today. Currently, the Japanese government bonds take approximately two days to deliver them to the buyers, electronically. Arrangements on Blockchain will provide instant delivery of these bonds.
This is a massive step in creating a digital banking and trading environment powered by blockchain technology. Several banks and clearing houses in London, Australia, Hongkong, and Canada are also exploring the feasibility and advantages of a security token. According to reports, the London Stock Exchange is also conducting tests with digital securities.
Nevertheless, the bank is seeking for regulatory approval for the same at this point. Farooq mentioned that they will begin testing with a few clients this year, although, it might be delayed towards the end of the year for regulatory approval.
The applicability of blockchain in the banking and financial sector is being increasingly explored owing to its ease of functioning and speed of delivery. JP Morgan Chase and Co has correctly tapped the blockchain resources for settling securities for its traders.