Fidelity International has joined JPMorgan’s Tokenized Collateral Network (TCN) by tokenizing its own money market fund with the help of Onyx Digital Assets. This move aims to enhance the efficiency of delivering margin requirements while reducing transaction costs and operational risks.
Fidelity International, based in London, has utilized JPMorgan’s Ethereum-based private blockchain, Onyx Digital Assets, to tokenize shares in its money market fund (MMF). This tokenization process was achieved almost instantaneously due to the connectivity between the fund’s transfer agent (JPMorgan’s transfer agency business) and the Tokenized Collateral Network. This network acts as an intermediary between a collateral receiver and provider on JPMorgan’s Onyx blockchain.
The tokenization of traditional financial assets, such as real estate, precious metals, collectibles, stocks, and bonds, is becoming a priority for many banks. JPMorgan has been pioneering this area for several years. Fidelity International, distinct from U.S.-based Fidelity Management and Research, has also been active in the digital assets space, most recently collaborating on a tokenization project with Swiss bank Sygnum in March.
In October last year, JPMorgan executed its first live blockchain-based collateral settlement transaction involving tokenized shares in a BlackRock money market fund. These shares were transferred to Barclays as collateral in an over-the-counter derivatives trade. Since then, BlackRock has further embraced tokenization through its public-facing BUIDL project with Securitize, a tokenization services firm.
Stephen Whyman, head of debt capital markets at Fidelity International, emphasized the importance of this step, stating, “Tokenizing our money market fund shares to use as collateral is an important and natural first step in scaling our adoption of this technology. 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 initially focused on tokenizing money market shares, which are mutual funds that invest in high-quality, short-term debt instruments and cash equivalents. The bank plans to expand this initiative to include equities, fixed income, and a variety of other asset classes. Keerthi Moudgal, head of product at Onyx Digital Assets, stated, “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.”
