Group items tagged

JPMorgan executed a blockchain-based repo transaction using its JPMCoin wholesale stablecoin and atomic trade settlement that links the two legs of the transaction to ensure that the transfer of one asset occurs if and only if the transfer of the other asset also occurs. "The repo market provides a widely used form of secured financing, however, current operational limitations prevent the meaningful use of such financing to meet intraday liquidity needs. Using blockchain enables borrowers and lenders to execute shorter-term, intraday repo transactions with real-time, simultaneous transaction settlement, creating new ways to access intraday liquidity." https://www.businesswire.com/news/home/20201210005155/en/J.P.-Morgan-Executes-Intraday-Repo-Transaction-Using-Blockchain

ABN AMRO executed four repo pilot trades with DLT-based wholesale central bank digital currency (CBDC) utilizing tokenized commercial paper (CP) as collateral in late October 2024. This served to test one of three payment options (in this case the one being led by the Banque de France) that are part of the ECB's DLT-based wholesale settlement trials. ABN AMRO issued €1.1 million of the tokenized CP that was used as collateral in the latest transaction, which involved four reverse repo transactions between ABN AMRO Bank, ABN AMRO Clearing, and Rabobank, cleared by Eurex Clearing. In a repo Repo (repurchase) transaction one party (e.g., Bank A) sells securities to another party (e.g., Bank B) and agrees to buy them back later at a slightly higher price. ABN AMRO Bank's Treasury regularly uses repos for balance sheet management.

Fnality and HQLAᵡ have completed end-to-end testing to enable intraday sterling repo settlement on the Eurex Repo F7 platform via their two blockchain networks. They plan to go live in Q4 2024 subject to UK regulatory approvals. Fnality is a UK-regulated systemic payment system and HQLAᵡ operates a digital collateral registry to enable intraday collateral movement. Fnality's settlement instrument is effectively a "synthetic" wholesale central bank digital currency (CBDC) - i..e., a sterling-denominated stablecoin backed by deposits in a Bank of England omnibus account. In conventional repo transactions, the collateral settlement takes two days, but on the Fnality/HQLAᵡ platform, trades can be settled on a atomically intra-day delivery-versus-payment (DvP) basis. https://www.linkedin.com/posts/eurex_eurex-repo-dlt-activity-7208755407740137472-g29d/

Singapore's OCBC bank executed an intraday reverse repurchase (repo) transaction on JP Morgan's Onyx Digital Assets platform, in which it lent money to JP Morgan, receiving tokenized securities in exchange. Less than four hours later, the transaction was unwound together with interest. JP Morgan said this was the first time an external counterparty had the ability to execute reverse repos. It's usually JP Morgan that does the cash lending to clients, taking tokenized securities in exchange. So far it has ten clients using the repo platform, which has conducted a cumulative $1.5 trillion in transactions since its launch in 2020."

State Street launched a new Peer-to-Peer Repo program for the buy-side that they say enables competitive financing costs across a broader range of collateral types and yield enhancement opportunities compared to traditional repo markets. State Street guarantees the payment obligations of cash borrowers to cash lenders within the program following a default, thus facilitating bilateral trading by counterparties with varying credit and capital strength. Program participants trade with one another pursuant to a common master repurchase agreement, negotiating trade terms with approved counterparties within the program's broader requirements guidelines.

As part of the ECB wholesale DLT settlement trials using central bank money, HQLAᵡ was involved in an intraday repo transaction where Goldman Sachs borrowed cash from Clearstream in exchange for collateral held on the HQLAᵡ DLT platform. HQLAᵡ is a collateral mobility solution in which assets held by custodians are locked and digitized in the HQLAᵡ digital collateral registry, with the legal agreements enabling collateral to transfer instantly using DLT. In this case, the cash leg of the transaction used the Bundesbank's Trigger solution. The trades were agreed via the Eurex Repo F7 trading system, and Deutsche Börse's Clearstream D7 digital securities platform was used as the market system operator.

"A new report from Finadium assesses operational liquidity for cash providers in tokenized repo. It finds that there are tangible challenges but also solutions at hand, albeit ones that require time and effort to work through. We invite your comments and questions."

Societe Generale (SocGen) completed a collateralized market transaction fully executed on blockchain through its FORGE subsidiary. This is the first sale and repurchase agreement (repo) transaction in digital securities with a Eurosystem central bank. SocGen deposited as collateral with the Banque de France some bonds issued in 2020 on the public Ethereum blockchain in exchange for pilot central bank digital currency (CBDC) issued by the Banque de France on its DL3S blockchain.

The first live trades JPMorgan conducted were between the bank's broker-dealer and banking units, using the Onyx blockchain platform. In a test environment, JPMorgan has also traded with Goldman using Bank of New York Mellon Corp. as the triparty agent. Goldman is expecting to join Onyx for intraday repo trading as soon as January.

"JP Morgan has been quietly building an intraday repo market based on its distributed ledger system. The project passed milestones in December 2020, when it completed its first trade, and in June 2021, when Goldman Sachs joined the network. JPMC says that daily volume is in the billions of dollars, still tiny compared to the broader repo market. But this is a core money market institution using blockchain near the center of the existing payment system, so it is an experiment worth watching."

U.S. Senator Hagerty introduced the Bill for the U.S. Stablecoins (GENIUS) Act, in collaboration with co-sponsor Senators Tim Scott, Kirsten Gillibrand (Democrat) and Cynthia Lummis, aimed at regulating stablecoins by establishing clear issuance procedures and designating federal and state regulators based on the issuer's size. For example, the Bill allows state regulators to supervise payment stablecoins of under $10 billion. Reserve requirements would limit the type of backing collateral to commercial bank deposits, short-term Treasuries, repo and reverse repo involving short-term Treasuries, similar money market funds and central bank reserve deposits. https://www.hagerty.senate.gov/wp-content/uploads/2025/02/GENIUS-Act.pdf

Fnality and HQLAX demonstrated together with Banco Santander, Goldman Sachs and UBS, the first cross-chain repo swap pilot across Corda and Enterprise Ethereum, paving the way for the settlement of intraday transactions. This is part of Fnality's mission to provide its participants with a single pool of liquidity to facilitate payments (P), cross-currency payments (PvP) and delivery versus payment (DvP) use cases. This pilot also proves interoperability across the Fnality Payment System and HQLAX's Digital Collateral Registry, bridging Corda and Enterprise Ethereum. Fnality was founded to create a network of decentralised financial market Infrastructures (dFMIs) to deliver the means of payment-on-chain in wholesale banking markets, based on wholesale stablecoins backed by central bank reserves. The HQLAᵡ operating model leverages distributed ledger technology to enable atomic delivery verses delivery (DvD) for baskets of securities residing at multiple custodians.

Goldman Sachs has joined the blockchain-based network created by JPMorgan Chase for repurchase agreements that use smart contracts and a digitized version of the U.S. dollar. On June 17 it swapped a tokenized version of a U.S. Treasury bond for JPMCoin, JPMorgan's internal representation of a digital dollar. The digitized upgrade provides same-day settlement ability using smart contracts on an Ethereum-based blockchain that allow cash and Treasuries to be returned instantaneously.

Deutsche Börse and HQLAX have successfully launched their DLT solution for collateral swaps in the securities lending market. The first live transactions were executed by Commerzbank, Credit Suisse and UBS on the Eurex Repo F7-trading system.

"JP Morgan already enables tokenized U.S. dollar deposits with JPM Coin. Now it plans to enable blockchain-based Euro deposits 'soon'… Most blockchain financial applications sit under JP Morgan's Onyx division. This includes Onyx Digital Assets with an intraday DLT repo application, Liink for messaging around conventional payments and JPM Coin. It's also experimenting with using JPM Coin on a public blockchain as part of Project Guardian, its Singapore DeFi experiments with the Monetary Authority of Singapore."

Tether, the issuer of the USDT stablecoin, cut its exposure to cash and bank deposits in Q1 2023, shifting into US Treasuy Bills and leveraging the reverse repo market. Also, as of March 31, 2023, $1.5 billion in assets were held in Bitcoin and 6.5% of its reserves in secured loans to non-affiliated entities.

"No cryptocurrency has anything like the capacity to serve as a medium of exchange in the modern retail economy. Blockchain is an interesting and useful technology, suitable for small networks, centrally administered, that need quick and reliable execution on high-value transactions. The Onyx system developed by JP Morgan for settlement of wholesale inter-bank repo transactions is an example that seems to be successful. But blockchain cannot currently address the capacity requirements of massive retail payments systems."

The US-based Bank Policy Institute (BPI) is raising concerns that a sizeable proportion of Circle's USDC stablecoin reserves could be parked at the Federal Reserve, despite Circle not having a central bank account. Since November, BlackRock has been managing about two-thirds of the reserve assets in a bespoke money market fund, the Circle Reserve Fund (CRF) , which invests mostly in U.S. short-dated Treasuries. The BPI claims that Blackrock has applied for the fund to access the Fed's overnight reverse repo (ON RRP) facility, which provides money funds and government-sponsored enterprises a standing option to invest overnight with the Fed at a fixed rate, currently 4.3%. This involves the fund buying Treasuries from the Fed, which are resold to the Fed at a future date at a slightly higher price. The net effect of the cash flows, with the transfer of money to the Fed, is not dissimilar to depositing the USDC reserve cash at the Federal Reserve. The use of the ON RRP by the CRF could effectively transform USDC into a "backdoor" synthetic central bank digital currency (CBDC) if all of the assets are parked there. https://bpi.com/will-usdcs-blackrock-money-fund-create-a-back-door-cbdc-give-usdc-an-account-at-the-fed-or-both/

The Journal of Financial and Quantitative Analysis will be publishing a paper by Gary Gorton and others on how stablecoins can maintain a constant price even though they face run risk and pay no interest. Stablecoin holders are compensated for stablecoin run risk because they can lend the coins to levered traders. Levered traders are willing to pay a premium to borrow stablecoins when speculative demand is strong. However, when speculative demand falls, stablecoin issuers can keep their debt trading at par only by moving to a safer portfolio or allowing redemptions. Stablecoin issuers will need to make these adjustments quickly to avoid the risk of collapse, which may cause disruptions in the markets they invest in, such as Treasuries, commercial paper, and repos. [Read more at SSRN]

SIX launched its Digital Collateral Service (DCS), permitting financial institutions to post selected crypto-assets as collateral alongside traditional collateral. Firms managing both bonds and bitcoin, for example, can now post both as collateral to cover a single exposure. However, crypto cannot be used as collateral on SIX exchanges or for repo transactions. The aim is to provide a conventional collateral solution for OTC and bilateral trades of crypto. https://www.six-group.com/en/newsroom/media-releases/2025/20250212-digital-collateral-service.html