Today the Financial Times reported that BNP Paribas has joined the blockchain-based repo platform operated by Onyx, the digital assets unit of JP Morgan. The solution tokenizes U.S. Treasuries and JP Morgan bank balances, enabling Treasury owners to borrow cash on an intraday basis.
The owner of the Treasury sells the asset and agrees to repurchase it later in the day, enabling short term borrowing. Regulations stipulated by the Basel Committee require banks to hold minimum levels of high quality liquid assets (HQLA). Hence there’s a significant amount of trading in these assets. In 2020 the U.S. repo market size was $4.5 trillion in terms of average outstanding balances. The plan is for the repo platform to expand beyond Treasuries.
JP Morgan’s platform was launched in late 2020 and signed up Goldman Sachs in the middle of last year. According to the FT, the platform has processed $300 billion to date. Financial technology company Broadridge is a major operator in the repo market, and also launched a DLT-based platform which was processing $35 billion daily as of August last year.
Onyx has multiple blockchain solutions in addition to the repo platform. The first offering was Liink (formerly IIN), a solution that helps to expedite cross border payment queries. It’s developing its tokenized payment solution, Coin Systems, as in JPM Coin, and is also targeting payment solutions for the wholesale sector.
In Singapore, the bank is a participant in Partior, the interbank multicurrency payments joint venture that aims to reduce the cost of cross border payments. In a recent paper with Oliver Wyman, the bank estimates the cost of corporate wholesale payments could fall from $120 billion to as little as $20 billion.
JP Morgan’s Onyx also participated in a multi-central bank digital currency (mCBDC) project between Singapore and France. That involved Onyx borrowing ideas from the DeFi world and using an automated market maker for deciding FX rates. One of the drivers is the need for 24/7 operations.