Capital markets News

JP Morgan to open up Onyx Digital Assets to third party applications

jp morgan onyx lok

Today Stephanie Lok of Onyx by JP Morgan revealed that the Onyx blockchain has now processed more than $1 trillion in notional transactions. It follows the revelation earlier this week that its blockchain handles up to $2 billion in transactions daily. The biggest announcement during the Tokenize This  conference is that JP Morgan plans to open its permissioned blockchain to allow third parties to deploy apps. That would also enable others to tokenize assets on the JP Morgan blockchain.

JPM Coin Systems, the blockchain-based account solution, is the highest profile Onyx offering. However, it has a separate group focused on Onyx Digital Assets, the area where it wants to partner with third parties. In late 2020 it unveiled an intraday repo solution (Onyx digital financing) with Goldman Sachs as a participant. Last year its Tokenized Collateral Network launched with BlackRock and Barclays as partners. The Onyx digital debt servicing offering went live last week with the issuance of a blockchain-based municipal bond by the City of Quincy near Boston.

Next up is funds.

Onyx by JP Morgan plans for fund tokenization

Last year JP Morgan shared the results of its Project Guardian fund tokenization trials with Apollo and WisdomTree, which was discussed during the conference today.

JP Morgan is keen to move its proofs of concept (PoCs) into live products, so that’s its current focus. “We’re working with a fund manager, distributor, (and) fund admin to really tokenize an alternative investment fund to see what that could look like,” said Ms Lok. “And that would be a first step.”

While not all alternative investment funds are a good fit, the goal is to diversify the returns of alternative investments.

One of the pain points is limited liquidity. While blockchain’s fractionalization is often touted as a quick liquidity fix, that’s not the case at the current stage of maturity. Hence, the funds in focus have more liquidity, such as hedge fund structures and funds where it’s possible to avoid lock-ins.

When asked about the biggest tokenization challenge, Ms Lok mentioned the usual standardization and blockchain interoperability issues. However, it’s clear that Onyx’s key focus is to move beyond PoCs and demonstrate return on investment by launching production solutions.

“We’re going to need to continue building, continue proving out the use case and continue proving how much tokenization can provide operational efficiences, cost savings and also just open up new opportunities for revenue,” said Ms Lok.

Image Copyright: Tokenize This / STM