Investment bank Goldman Sachs has joined the blockchain network of financial holding JPMorgan to conduct REPO transactions using smart contracts and a digital version of the dollar.
According to Bloomberg, the bank made its first transaction on June 17, 2021. The institution exchanged the tokenized US Treasury bonds for JPM Coin stablecoins.
According to Mathew McDermott, one of the managers of Goldman Sachs, the successful transaction confirmed the reliability and functionality of the infrastructure for digitizing transactions.
Unlike traditional repo, on the blockchain it is possible to calculate the time to complete an operation. For example, in the case of Goldman Sachs, the transaction took three hours and five minutes. The bank didn’t disclose its amount. Knowing the exact timing of a trade is a big improvement over existing markets. Timing is important because banks pay interest on a per-minute basis, McDermott said. Thanks to smart contracts, the exchange of assets occurs instantly.
The bank’s representatives are confident that this will change the very essence of intraday trading.
Repo trades bring in money overnight or over several days. But they are difficult to arrange within the same trading day. Modern technologies provide this opportunity. Blockchain-based smart contracts allow instant returns of funds and securities.
The repo agreement actually allows you to take a short-term loan secured by securities. This is legally formalized as buying and selling.
Blockchain developments from JPMorgan
JPMorgan began testing its blockchain network in December 2020. It allows borrowers and lenders to execute short-term intraday repo transactions while settling transactions in real time. Making it easier to access intraday liquidity.
JPMorgan has launched a repo market on the Onyx blockchain platform. The daily trading volume is over $ 1 billion.
The development of the blockchain has been a huge boon for the global repo market, which is currently valued at more than $ 4.6 trillion.
According to spokesman Jessica Francisco, the conglomerate is in talks to join the network with a dozen banking and investment clients.
This is not the first blockchain development from JPMorgan. In August last year, he sold his other blockchain network, Quorum. Wall Street started experimenting with blockchain about five years ago.
Recall that JPMorgan, together with DBS bank and Temasek company, announced the creation of a blockchain platform for interbank payments, trade and settlements in foreign currency.
In addition to JPMorgan, there are others, for example, the Paxos Trust uses technology to regulate some stock transactions in near real time, and the Arca platform offers to buy digital shares of American issuers through the blockchain.
Blockchain technology is a chain of blocks, where each element contains a set of confirmed transactions. Unlike centralized registries, which are maintained by banks and other financial institutions, in the blockchain, data is recorded simultaneously on all computers connected to the Network. This type of database system will allow a large number of users to simultaneously access information without intermediaries and other complexities.