French lender BNP Paribas (OTCQX:BNPQF) (OTCQX:BNPQY) on Monday has turned to U.S. rival JPMorgan's (NYSE:JPM) blockchain-powered network for short-term trading in fixed income markets, according to a report by the Financial Times.
JPMorgan's (JPM) so-called Onyx Digital Assets network, which has raked in over $300B in intraday repurchase (repo) deals since its rollout in December 2020, allows banks to lend out U.S. government bonds -- without those bonds leaving their balance sheets -- for a few hours as collateral, the FT noted.
Specifically, when banks tokenize government debt, of which they hold large amounts due to a slew of post-crisis regulatory requirements, they can briefly turn those assets into collateral without lowering their safety buffers, the FT explained.
Repurchase agreements are a form of short-term borrowing (typically overnight) of liquid government securities, the safest kind of collateral. As for JPMorgan's (JPM) blockchain, the token represents a digital version of a Treasury bond and borrowers can turn it in for cash.
“This is not just proof of concept work, we see this as part of our efforts to utilise the technology for the whole trading and operations lifecycle as the market evolves,” said Joe Bonnaud, global markets chief operating officer and head of engineering at BNP Paribas, as quoted by the FT.
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