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JPMorgan Finds New Use for Blockchain in Trading and Lending (bloomberg.com) 33

Posted by msmash from the how-about-that dept.
JPMorgan Chase is using blockchain for collateral settlements, the latest Wall Street experimentation with the technology in the trading of traditional financial assets. From a report: The bank's first such transaction came on May 20, when two of its entities transferred the token representation of BlackRock money market fund shares as collateral on its private blockchain. The effort will allow investors to pledge a wider range of assets as collateral and use them outside of market operating hours, according to New York-based JPMorgan.

"What we've achieved is the friction-less transfer of collateral assets on an instantaneous basis," Ben Challice, JPMorgan's global head of trading services, said in an interview. While BlackRock wasn't a counterparty, "they have been heavily involved since Day One, and are exploring use of this technology." Blockchain-based collateral settlement can be used for transactions such as derivatives and repo trading, as well as securities lending. In the coming months, the bank plans to expand tokenized collaterals to include equities, fixed income and other asset types, it said.
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JPMorgan Finds New Use for Blockchain in Trading and Lending More

JPMorgan Finds New Use for Blockchain in Trading and Lending

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  • Blackrock: Turning you into a permanent renter-class. Now with blockchain!

  • Since the creators control the blockchain and its code (code is law), doesn't that mean that in theory they can make up whatever prices or amounts owed they want? Also, "use them outside of market operating hours" sounds like trying to avoid trading hours and possibly related regulations.

    • Re: (Score:2, Informative)

      by Jack9 ( 11421 )

      > Since the creators control the blockchain and its code (code is law), doesn't that mean that in theory they can make up whatever prices or amounts owed they want?

      It looks like you didn't even understand the summary. It mentions JPM Morgan's private blockchain implementation. Ofc they can interpret what's on it however they want.

      What they have done is create a reliable (traceable, durable, auditable, etc) way to do promissory note-based transactions. This has nothing to do with circumventing regulations

      • JPMC doesn't even joke about that internally.

        Found the JPM employee!

        Isn't blockchain basically a double-entry accounting ledger? With some additional cryptographic digest features that allow for zero trust? Or am I missing something.

        • Re: (Score:1)

          by Anonymous Coward

          You're pretty much spot on. What JPMC is using this for is pretty much what the inventors of blockchain technology envisioned.

          An immutable ledger that enables automated contract execution and clearing. Right now that work is actually handled outside of the marketplace after the terms of the contract have been agreed to. The blockchain becomes the marketplace to transact business. And, it's the 'coin' chains that have the enormous energy requirements due to proof of work requirements. A private chain re

          • Whatever the "inventors" of blockchain (whom?) envisioned I can guarantee you it was not this. It's true a private chain doesn't require proof-of-anything. It is likewise true the private blockchain doesn't provide anything meaningful in terms of integrity unless you add various elements that could have provided the same thing without the blockchain. Finally, it is misleading to write "An immutable ledger that enables automated contract execution and clearing". It doesn't enable anything. All of that could

            • It is likewise true the private blockchain doesn't provide anything meaningful in terms of integrity ... All of that could have been done simpler and cheaper, and just as securely if not more so, in JPM systems using classical techniques.

              A vetted codebase, and ability to hire/fire/contract out expertise rather than rolling their own, maybe?

      • You really drank the Kool Aid, eh ? The whole thing is meaningless on a private blockchain. When it's private, JPM could at any time rewrite the whole thing and make it look like history took a different turn. No one on the outside will notice. Of course, if they periodically publish hash values of the chain somewhere (on their website, to regulators etc.) then they are committed to the value of their blockchain up to that point, assuming someone stored these hash values and later asked to do a full audit o

        • Re: (Score:2)

          by Jack9 ( 11421 )

          > You really drank the Kool Aid, eh ?

          What are you referencing? It reads like some inside joke to yourself.

          You restated what I asserted. As I said, it's useful to JPMC for whatever purpose they want it to serve.

    • Re: (Score:2)

      by ceoyoyo ( 59147 )

      Code is not law. Law is law. In this case, contract law.

      The article doesn't say exactly what they've done, but suppose I'm your investment bank and you want to buy some shares in some company. Normally you'd deposit some money with me, then click a button on my web site that would send me an order saying "devslash0 wants to buy X shares of Y for $Z." I'd check your balance, deduct $Z from your cash account and add X shares to your holdings, and send back and acknowledgement.

      If you really wanted to use "bloc

  • Where's Steve Balmer [youtube.com] when you need someone to mindlessly repeat something stupid until everybody gets dizzy?

    • There might be merit to using blockchain technology. Using it to sell off NFTs or monopoly money is the worst side of it.

      Think of it like soup: people like soup, but that doesn't mean soup made with turds is what people want, and it's not a useful use of soup technology.
      • That could very well be. Bitcoin is a case where the blockchain at least technically makes sense, unlike a lot of other bs touted. Where are all these other good use cases? Blockchain has been around since 2009, and in 2014 the RSA conference using blockchain for things beside cryptocurrencies was all the buzz. Billions of USD later, nothing is in production. Will people in 10 years say "Oh, give it time, it takes time to develop such sophisticated (puke!) technologies, and developing the use cases. Rome wa

    • Re: (Score:2)

      by splutty ( 43475 )

      There's nothing wrong with the underlying principles of blockchain. It's just that pretty much everything it's currently used for is hot garbage.

      Unfortunately thanks to shit like crypto 'currency' and NFTs people equate 'blockchain' with those.

  • Private Blockchain (Score:5, Insightful)

    by kyoko21 ( 198413 ) on Thursday May 26, 2022 @12:04PM (#62568016)

    Isn't a private blockchain just a database with extra steps?

    • Yes, except fiddling a few rows in a normal private database doesn't get you on the front page as if doing the same thing in a private blockchain.

    • Re:Private Blockchain (Score:5, Interesting)

      by Anonymous Coward on Thursday May 26, 2022 @01:02PM (#62568182)
      I wouldn't even say that it's a "blockchain". At the point where only one company is running the thing, it's probably much more fair to call it a Merkle Tree-protected database. https://en.wikipedia.org/wiki/... [wikipedia.org]

      "Blockchain" is just the buzzword-rebranding of a Merkle Tree distributed over a peer-to-peer network. Napster for Banking.

    • Re: (Score:2)

      by ceoyoyo ( 59147 )

      It's GitHub, except every committer signs their commit with their private key.

      Public blockchain is GitHub except everybody signs their pull request with their private key.

    • Depends on the governance of the network.
    • It's more of an immutable storage solution where one can choose their own storage locations if they want. It's also tamper proof.

  • The SEC and IRS would love to see trading information in a public, immutable ledger...for many reasons that should be obvious to any thinking person.

  • Impressive (Score:3)

    by paradigm82 ( 959074 ) on Thursday May 26, 2022 @01:00PM (#62568160)
    Wow so they JP Morgan appended a few kilobytes of data to a data structure wholly maintained by them, then calculated a hash over it?! WOOOW! Mindboggling innovation and news-worthiness. I wonder what benefit JPM seems to get from this or what their threat model is. But maybe the real purpose is to get on the front page for cheap? Or maybe their employees are idiots.

  • Note that this article is inaccurate. You cannot find any post from JPM that says what the Forbes article claims that's less than a year old. I don't know how this un-sourced tidbit picked up as much traction as it did. There's no evidence JPM said those things.

  • The only reason to trade crypto IMO instead of stocks is those two items. In crypto, you have instant gratification and access to funds at any time. THAT is the future of the market. Expect a tether token from JPMC as well... publicly seen or not

  • > Blockchain-based collateral settlement can be used for transactions such as derivatives and repo trading, as well as securities lending.

    How do we know the collateral is real and these are not just tokens in a blockchain with no value?

    This sounds like a new version of Mortgage Derivatives, where the mortgages were garbage. We are headed toward 2008 again with this. Hiding what is real behind something that only looks real is a bad design.

    Quick and easy transactions is a great goal, and this might achie

    • > How do we know the collateral is real and these are not just tokens in a blockchain with no value?

      Well, yea, it's the economic version of vapourware /s

  • There are many ways to prove the validity of transactions, if indeed that's what part of this is. There have been for years.

    Regarding that crypto contract crap, when the S*t hits the fan with some $$$$ transaction, call me crazy, but I don't think they're going to trust the code. They're going to call real lawyers.

    Tech bro "we just lots a gajillion dollars because of partner X, but this new-fangled contract block chain thingie is supposed to take care of all this."
    Big boss at risk for losing his big bonus

  • How is trading or lending a "new" use of blockchain technology?

  • That's pretty interesting, I didn't even know about this use of blockchain. And that's actually weird because I've been in that field for a while, and I even plan to work with crypto launch pad [bhero.com] , so I guess I still have to learn more about various blockchains and their advantages. Who knows, maybe I'll discover anything else as well.

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