JPMorgan Chase's Blockchain Unit Plans To Bring Trillions Of Dollars In Tokenized Assets To DeFi

JPMorgan Chase JPM plans to tokenize institutional funds and have decentralized finance (DeFi) developers capitalize on non-virtual assets.

What Happened: Tyrone Lobban, head of Onyx Digital Assets at J.P. Morgan, discussed the plans at the CoinDesk's Consensus 2022 event in Austin, Texas. The goal is to link traditional and virtual assets by tokenizing institutional money (i.e., money market funds or US treasury funds).

Essentially, JPMorgan Chase looks to tokenize these major assets and collateralize them in DeFi pools. In order to effectively tokenize these assets, the company seeks to employ tokenized renderings of money market shares in the form of collateral for DeFi activities. This endeavor has been integrated into the Onyx Digital Assets blockchain, with the domestic currency JPM coin, which has seen a volume of $350 billion traded.

JPMorgan Chase is also initiating “Project Guardian”, which trials institutionally compatible DeFi via liquidity pools, constituting tokenized deposits and bonds.

"The overall goal is to bring these trillions of dollars of assets into DeFi, so that we can use these new mechanisms for trading, borrowing [and] lending, but with the scale of institutional assets,” Lobban said.

Why It's Important: Using institutional-level assets as financial tools in DeFi allows both markets to benefit from each other. This bridging allows DeFi to expand with the pouring of large-scale institutional money into it. Furthermore, it allows traditional institutional asset classes to benefit from the technology and tokenomics underlying different DeFi mechanisms, of trading, lending, and borrowing. As permissionless lending pools, within the crypto space, have know-your-customer (KYC) restraints put on them, the world of institutional and virtual assets come together to innovate the DeFi space on a larger scale. Lobban explains the importance of “verifiable credentials” in institutional DeFi, stating “We want to use verifiable credentials as a way of identifying and proving identity, which is different from the current Aave model, for instance.” By shifting "permissionless pools" to "permissioned pools" and employing conventional collaterals in DeFi activities, JPMorgan Chase is empowering the landscape of DeFi with institutional funds.