Fidelity International, a London-based fund management company, has tokenized shares in a money market fund (MMF) on JPMorgan's Onyx Digital Assets private blockchain network, Coindesk reported June 10.
The move is intended to improve efficiency in delivering margin requirements, while reducing transaction costs and operational risks, Fidelity International said.
Tokenization of shares in a money market fund occurs almost instantaneously through a connection between the fund's transfer agent (JPMorgan's transfer business) and the Tokenized Collateral Network (TCN), an application that sits between collateral takers and collateral providers on the Onyx blockchain.
Tokenization of traditional financial assets has become a top priority for banks, and JPMorgan has been researching this area for many years. The essence of tokenization is to create on the blockchain a virtual investment instrument that represents real assets such as real estate, precious metals and collectibles. Stocks and bonds can also be tokenized.
Fidelity International also has a long history with digital assets and joined a tokenization project with Swiss bank Sygnum in 2019.
Last October, JPMorgan executed the first blockchain-based collateral settlement transaction involving tokenized shares in a BlackRock money market fund. Shares were transferred to Barclays as collateral in OTC derivatives transactions. BlackRock has continued to advocate for tokenization through its public-facing BUIDL project, in partnership with tokenization services firm Securitize.
Stephen Whyman, Head of Debt Capital Markets at Fidelity International, said in an email interview: that “Tokenization of our money market fund shares for use as collateral is an important first step important and natural in expanding the adoption of this technology.”
“The benefits for customers and the wider financial system are clear; especially improved efficiency in delivering margin requirements and reduced transaction costs and operational risks,” he emphasized.
