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The largest investment bank JP Morgan has discovered a new application of blockchain in the credit sector. In the future, this system may become another bridge between traditional and decentralized finance.
According to Bloomberg journalists, the bank’s specialists issued the first instant loan for tokenized shares of one of the BlackRock money market funds.
Tokens were transferred to a private blockchain for “freezing”. Unlike the placement of collateral in the traditional way, tokenization saved the bank from the need to check the client’s right to securities, which in turn is exempt from the costs of maintaining a depository account.
This reduced the time of obtaining a loan, and the recalculation of the collateral value in real time through the price oracle was also automated. In the future, smart contracts will be able to decentralize margin replenishment requirements and sell collateral if the share price falls below the thresholds of credit coverage.
JP Morgan’s general manager of global operations predicted in an interview with Bloomberg the expansion of the new form of services to the derivatives and repo market. This will significantly reduce the trader’s commission costs on leverage and reduce the size of the collateral.
If JP Morgan manages to reduce the cost of brokerage services in this way, the bank’s competitors will be interested in tokenizing the securities market. Brokers will push the transition of this segment to the blockchain, which will reform clearing and depository services.
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