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J.P. Morgan and Baton to Deliver Real-Time Collateral Settlements Using Blockchain

November 15, 2019
Ross Peili


J.P. Morgan and Baton to Deliver Real-Time Collateral Settlements Using Blockchain

According to a press-release submitted at CISION yesterday, on November 14th, America’s largest investment bank, J.P. Morgan, is planning to introduce a ‘near real-time’ system to transfer cash, collateral, and derivatives among clearinghouses, using distributed ledger technology developed by blockchain-firm Baton Systems (DLT). 

The new service to be rolled out by the major financial institution is said to be an overlay build on top of existing settlements infrastructure and it is not meant to completely disrupt the existing system custodians and funding sources that have been utilized so far.

Essentially a custom-made distributed ledger network developed by Baton is set to involve ‘settlement instructions’, most likely in the form of typical smart-contracts, that will enable faster settlements across clearinghouses, integrated with JPM’s existing business processes, eliminating the need for a full infra-scrap.

This will particularly help margining and collateral workflows, that are currently subject to pre-funding, while at the same time, the system will be able to offer real-time notifications and visibility regarding asset flows between JP Morgan and clearinghouses. 

“The technology we have developed reduces the time needed to process the entire collateral workflow from hours to near real-time,” says Anthony Fraser, Head of Global Clearing Operations and Trading Cost Management at J.P. Morgan. 

In addition, the new solution will also boost timewise collateral substitution processes with two legs, including cash/collateral, currency/currency, and collateral/collateral processes. 

The distributed ledger system Baton made for J.P. Morgan is already available across all major US-based and some international derivatives firms associated with JPM’s activities. 

Despite Jamie Dimon’s personal views on cryptocurrencies, and blockchain technology, the financial giant is one of the leading players in Wall Street when it comes to hiring blockchain experts

JP Morgan was also one of the first, if not the first commercial bank to test public blockchains, including the network behind the world’s second-largest cryptocurrency by market capitalization, Ethereum (ETH).

It seems that on one hand we have banks who talk about blockchain adoption, yet they don’t have not one single use-case utilizing a distributed ledger network, while on the other hand, you can find J.P. Morgan, who cringes hearing the words ‘blockchain’, or ‘crypto’, yet it has tried and utilized more blockchain solutions than the shirts we would change in a full-working week.

Of course, JPM is not the only bank to be piercing through blockchain’s potential, and while JPM and other US banks are relying on blockchain-firms to tackle with DLTs, on the other side of the Pacific, the Dutch ING not only has done its own homework, but it now offers advice for top-shelf blockchain solution providers such as R3’s Corda network.