JP Morgan Chase and Co. is planning to enable instant settlement of securities on the Blockchain using the JPM coin as per reports. The JPM coin released in February 2019 is a stablecoin that is backed by the US dollar at a ratio of 1:1.
Umar Farooq, head of digital treasury services and blockchain at JP Morgan told the media in an interview,
“We believe that a lot of securities over time, in five to 20 years, will increasingly become digital or get tokenized,”
On the blockchain or JP Morgan deposit wallet, “seller’s bonds are represented by tokens,” these are then computed by the smart contracts which then yields the bond contracts. Hence, the US bank has primarily created a digital version of the security, called a Security Token in general terms.
Shuichi Ohsaki, Chief rates strategist at Bank of America Merrill Lynch also attended the event in Tokyo who cited the slow transaction speed for settlement of such transactions. Currently, Japanese government bonds take two days to deliver them to the buyer electronically. Arrangements on Blockchain will provide instant delivery of these bonds.
This is a massive step in creating a digital trading environment powered by blockchain technology. Reportedly, banks and clearing houses in London, Australia, Hongkong, and Canada are also exploring the feasibility and advantages of a security token. As reported earlier on CoinGape, the London Stock Exchange is also conducting tests with digital securities.
Nevertheless, the bank is looking at procuring regulatory approval for the same. Farooq mentioned that while they will begin testing with a few clients this year.