Goldman Sachs Starts Trading on JPMorgan Chase’s Custom Blockchain Service for Repo Markets
Goldman Sachs’ global markets division’s global head, Mathew McDermott, has confirmed during an interview that his company has started trading on JPMorgan Chase’s custom blockchain service for repo markets. In its first trade (reportedly done on June 17, 2021), Goldman Sachs swapped US Treasury bond’s tokenized version with JPMorgan’s dollar-pegged stablecoin, JPM Coin.
This private blockchain service was started successfully last year by JPMorgan to enhance efficiency in repo agreements. Goldman Sachs reportedly was one of the first financial institutions to notice this platform last year. It took the ultimate plunge in using the private blockchain service after keeping an eye on it for over 6-months. Last year, McDermott had said that “enterprise blockchain can address a real-world problem in the financial system.”
Repurchase agreements or “repo” agreements is a trillion-dollar market. Repo agreements are short-term lending arrangements that allow dealers to sell government bonds overnight and repurchase them the next day at a price that is slightly higher.
After Goldman Sachs started trading on the customized blockchain service of JPMorgan Chase, McDermott lauded by saying that the blockchain technology has enabled logging of the precise timing of the transaction. This facility was not available in the traditional repo market.
Blockchain’s smart contracts help simultaneous and immediate interchange of both collateral and cash. This is a big improvement in the repo market. McDermott said:
“We pay interest per the minute. We firmly think this will change the nature of the intraday marketplace.”
The launch of stablecoin JPM Coin was first announced by JPMorgan Chase in early 2019. Its initial focus was on international settlements by major corporations. JPM Coin’s first ever trade started in December and instantly it became very popular among the transnational corporations for making cross-border payments 24x7. The Ethereum blockchain, Onyx, was established by JPMorgan Chase. It currently processes over US$1 billion worth of transactions daily.