Execute Wholesale Payments and Securities Settlement Efficiently
Sector: Tertiary sector · Industry: Banking and financial services · Organisation: JPMorgan Chase · Maturity level: Production
JPMorgan Chase deploys JPM Coin on its permissioned Onyx blockchain platform as a live production environment for institutional wholesale payments and securities settlement. Corporate clients and banks use this bank-backed deposit token to unlock trapped capital and execute round-the-clock settlements in near real time. The system supports international treasury operations and enables the intraday mobility of repo collateral.
Documentation status
- Project status: Production (as of 27 October 2020) — The system went into commercial production operation for initial institutional corporate clients in October 2020.
- Evidence: Evidence medium
- Editorial review: pending
Description
JPMorgan Chase demonstrates with JPM Coin on the Onyx platform (now Kinexys) how distributed ledger technology fundamentally modernises institutional payments. Large corporate clients and partner banks use the system to move funds in real time without interruption by weekends or holidays. The technology replaces lengthy clearing processes with programmable value transfers based on tokenised bank deposits.
The platform developed by JPMorgan Chase relies on a closed blockchain network based on Enterprise Ethereum standards and certified for the highest security requirements. Through the JPM Coin, which is backed one-to-one by US dollar deposits at the bank, corporate clients can finalise transactions instantly. The system is used especially for cross-border large payments, foreign exchange settlement, and intraday collateral management in repo transactions. The production launch at the end of 2020 proved that distributed ledger technology is marketable in the regulated banking environment and offers substantial operational efficiency advantages. Further development under the Kinexys brand aims to firmly establish programmable payments and the tokenisation of additional assets in the global financial market.
Perspectives
B2B — organisations perspective
Companies can move liquidity worldwide around the clock between accounts and significantly reduce counterparty risk in transactions. The programmable logic enables automated payouts upon the occurrence of certain business conditions.
Employees perspective
Employees in the Treasury and Middle Office departments benefit from drastically reduced manual reconciliation work. The transparency of the shared ledger minimises booking errors and simplifies audit processes.
Benefits
General
- Settlement of large transactions in real time around the clock
- Significant reduction of tied-up working capital
- Automated execution of contractual payments via smart contracts
B2B — organisations
- Optimised global cash management without cut-off times
- Reduced counterparty risk in securities and foreign exchange transactions
Employees
- Elimination of time-consuming manual payment investigations
- Direct transparency over the whereabouts of transactions
Challenges
General
- High regulatory requirements for digital deposit tokens in various jurisdictions
- Need for integration with heterogeneous internal IT systems of clients
B2B — organisations
- Restriction of the network to verified institutional partners and clients
- Requirement of sufficient balances on specialised custody accounts
Employees
- Requirement for further training regarding blockchain-based financial processes
Technology foundation
Permissioned distributed ledger technology based on the Quorum architecture within the Onyx network (now Kinexys). This closed architecture ensures regulatory compliance, confidentiality of institutional transaction data, and high throughput rates for interbank business.
Implementation examples
JPM Coin on the Onyx blockchain platform
Conventional cross-border payments and collateral processes often take days and tie up significant liquidity buffers at banks and corporate clients.
JPMorgan Chase introduced the JPM Coin on its proprietary Onyx platform for commercial settlement of large client payments.
JPMorgan Chase established the Onyx infrastructure to eliminate inefficiencies in global wholesale payments. Through the JPM Coin, institutional clients settle real cross-border payments and intraday repo transactions with immediate finality. The system went live in commercial production in October 2020 with a major technology corporation and has been continuously expanded since.
Elimination of delays caused by business hours, reduction of transaction risks, and minimisation of manual reconciliation processes in interbank transactions.
Tags
Payments, Settlement, Tokenisation, Treasury, DLT