KEY POINTS

  • JPMorgan plans to tokenize traditional assets like bonds, money market funds
  • This will be done in two parts, one of them being 'Project Guardian'
  • Interestingly, the participating institutions must verify consumer information

JPMorgan plans to tokenize traditional assets like bonds, money market funds, and U.S. Treasury and allow DeFi developers to tap on the yield-generating potential of non-crypto assets.

Speaking at the CoinDesk Consensus 2022, Tyrone Lobban, the head of Onyx Digital Assets, the business unit of JPMorgan that leverages cutting-edge technologies like Blockchain to develop innovative products, platforms and marketplaces, described the bank’s institutional-grade DeFi plans in great depth.

“Over time, we think tokenizing U.S. Treasurys or money market fund shares, for example, means these could all potentially be used as collateral in DeFi pools,” Lobban said. “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.”

Additionally, the bank intends to implement the tokenization of traditional assets in two parts. The first component is JPMorgan Chase’s blockchain-based collateral payment settlement system which was recently extended to include tokenized forms of BlackRock’s money market fund shares.

The second component is "Project Guardian," a pilot project led by the Monetary Authority of Singapore, which includes JPMorgan, DBS Bank and Marketnode that aims to test institutional-friendly DeFi using permissioned liquidity pools consisting of tokenized bonds and deposits.

The tokenization of assets will use public blockchains and will have a structure similar to Aave Arc, a permissioned liquidity pool specifically designed for institutions to maintain regulatory compliance in the decentralized finance (DeFi) space with a few major differences. The participating institutions must verify consumer information and confirm that they can trade on behalf of the Wall Street bank.

“Verifiable credentials are interesting because they can introduce the scale that you need to provide access to these pools without necessarily having to maintain a white list of addresses. Since verifiable credentials are not held on-chain, you don’t have the same overhead involved with writing this kind of information to the blockchain, paying for gas fees, etc” Lobban said.

JPMorgan Chase reported a jump in third-quarter profits due in part to the release of funds set aside earlier in the pandemic in case of bad loans
JPMorgan Chase reported a jump in third-quarter profits due in part to the release of funds set aside earlier in the pandemic in case of bad loans GETTY IMAGES NORTH AMERICA / JUSTIN SULLIVAN
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