Ben Strack

Two financial heavyweights were involved in a milestone collateral transaction via a decentralized application by JPMorgan Chase.



BlackRock used the company’s new Tokenized Collateral Network (TCN) to tokenize shares in one of its money market funds, JPMorgan told Blockworks in an email. It then sent those tokenized interests to Barclays as collateral for an over-the-counter (OTC) derivatives trade between the firms.



TCN is a private blockchain application on JPMorgan’s Onyx Digital Assets platform. This is the first collateral settlement for a live client OTC derivative transaction that TCN has facilitated.



The ability to post money market fund shares as collateral without first redeeming to cash “offers the prospect of greater efficiency and stability in times of market stress,” according to JPMorgan.



Ed Bond, JPMorgan’s head of trading services, said in a statement that TCN reflects an investment in the future of collateral markets — noting that this first transaction demonstrates the power of tokenized assets.&nbsp;&nbsp;



Read more: <a href="https://blockworks.co/news/real-world-assets-tradfi-defi-tokenization">TradFi, DeFi convergence continues through tokenizing real-world assets</a>



“[Money-market funds] can now be mobilized and utilized in a more efficient way, unlocking new pools of liquidity to be used for margining,” Bond added.&nbsp;&nbsp;&nbsp;



The collateral between <a href="https://blockworks.co/tag/blackrock">BlackRock</a> and <a href="https://blockworks.co/tag/barclays">Barclays</a> took one second to post — versus what could sometimes take one or more days, Ty Lobban, head of Onyx Digital Assets, said in a Wednesday X <a href="https://twitter.com/TyLobban/status/1712051772557033728">post</a>. He called the trade “another first” with another of the firm’s blockchain-based apps.&nbsp;



“TCN on Onyx Digital Assets is now open for business for institutional clients,” Lobban said in the post. “We have started with tokenized MMFs [and] plan to expand to other collateral types in the future. We believe ultra fast collateral movement will bring huge value to the $25T collateral industry.”



JPMorgan launched <a href="https://www.jpmorgan.com/onyx/onyx-digital-assets.htm">Onyx Digital Assets</a> in 2020. Its first application was facilitating intraday repurchase transactions to offer short-term borrowing in fixed income via the exchange of cash for tokenized collateral.



The company <a href="https://blockworks.co/news/jpmorgan-trade-on-public-blockchain-monumental-step-for-defi">used the Polygon blockchain to trade tokenized cash deposits</a> in November 2022. That trade was part of a broader pilot by the Monetary Authority of Singapore that also involved Singapore’s DBS Bank, Japan’s SBI Digital, Marketnode and Temasek.



<a href="https://blockworks.co/news/jpmorgan-lobban-blockchain-financial-instruments">Lobban noted during an Empire podcast last month</a> that BlackRock was “looking to tokenize money market fund shares,” noting that global clients have shown interest in such features while “almost not caring that it’s blockchain.”&nbsp;



<a href="https://blockworks.co/news/2023-year-of-asset-tokenization">Asset tokenization has infiltrated traditional finance</a>, as companies seek to reduce costs and boost efficiency. BlackRock CEO Larry Fink last year called the tokenization of securities <a href="https://blockworks.co/news/blackrock-ceo-still-in-crypto-for-the-tech-despite-ftx-scandal">“the next generation for markets.”</a>



Matthew Collison noted that the blockchain-facilitated trade with BlackRock is “a terrific example of driving innovation in post-trade settlement.”



“The tokenization of money market fund shares as collateral in clearing and margining transactions would dramatically reduce the operational friction in meeting margin calls when segments of the market face acute margin pressures,” Tom McGrath, deputy chief operating officer of BlackRock’s cash management group, added in a statement. “We&#8217;re excited to work with JPMorgan and Barclays to improve market efficiencies through this first trade.”



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BlackRock, Barclays use JPMorgan blockchain app in milestone trade

Shalini Nagarajan

Formulating a legal framework for crypto has dragged on for years, with no clear end in sight. One Barclays executive reckons it’s taken so long because regulators figured digital assets would simply die out.



The lack of tailored rules has led the US Securities and Exchange Commission (SEC) to target crypto via “<a href="https://blockworks.co/news/sec-ftt-complaint-is-yet-another-case-of-regulation-by-enforcement" target="_blank" rel="noreferrer noopener">regulation by enforcement</a>,” rather than establishing clear guidelines, industry figures have said.



In fact, US agencies ramped up crypto enforcement efforts over the past 10 months in light of the sudden collapses of prominent firms such as Celsius, Voyager and FTX.&nbsp;Regulators have often filed enforcement actions against firms after they’d filed for bankruptcy, leaving users (and their funds) stranded.



Some policymakers allowed the market to “do what it wanted to do because they thought it would essentially die,” Nicole Sandler, head of digital policy at Barclays, said recently at a London fintech conference per <a href="https://decrypt.co/125063/policymakers-didnt-regulate-crypto-because-they-thought-would-die-barclays-head-of-digital-policy" target="_blank" rel="noreferrer noopener">Decrypt</a>.



&#8220;And it hasn&#8217;t died, it&#8217;s grown, it&#8217;s grown, it&#8217;s grown.&#8221;



Sandler was part of a 2016 discussion around the legal framework for digital assets with the European Commission. She acknowledged that the industry was still in its early stages back then, but noted that wasn’t why regulators had since avoided establishing rules.



&#8220;It wasn&#8217;t that it was nascent and they couldn&#8217;t regulate it, it was a choice to see where the market went,&#8221; Sandler said. &#8220;And now they know that they have to regulate it. But the problem is regulation takes a long time from start to finish.&#8221;



More recently, three top US banking agencies, including the Federal Reserve, said that risks relating to the crypto sector mustn’t spill over into the banking system. They <a href="https://blockworks.co/news/banks-should-back-crypto-deposits-with-cash" target="_blank" rel="noreferrer noopener">warned</a> that institutions issuing or holding digital assets “is highly likely to be inconsistent with safe and sound banking practices.”



Separately, the SEC slapped Coinbase with a <a href="https://blockworks.co/news/sec-serves-coinbase-in-latest-alleged-crypto-securities-violation" target="_blank" rel="noreferrer noopener">Wells notice</a>, alleging violations of federal securities law. Days later, Binance was <a href="https://blockworks.co/news/bitcoin-and-ether-are-commodities-says-cftc-in-binance-lawsuit" target="_blank" rel="noreferrer noopener">sued</a> by the Commodity Futures Trading Commission for alleged evasion of trading and derivatives rules.



The SEC has <a href="https://blockworks.co/news/sec-crypto-related-fines-hit-2-6b-through-2022" target="_blank" rel="noreferrer noopener">dished out upwards of $2.6 billion</a> in fines to crypto startups since 2013, while a lengthy SEC court battle with Ripple looks destined to define how crypto is regulated moving forward.



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No Crypto Clarity Because Regulators Thought It Would Die: Barclays Exec

Sebastian Sinclair

<div id="highlights-block_62dde97d1c654" class="highlights">
 <ul>
 <li>Despite a declining global appetite for risk-on assets, Copper has managed to draw investment from one of the world&#8217;s most recognizable banks</li>
 <li>Barclays has reportedly invested &#8220;millions of dollars&#8221; according to a report, though the figure is not expected to be a considerable sum</li>
 </ul>
 
</div>



UK-based multinational banking giant Barclays has reportedly bought into crypto custody firm Copper&#8217;s latest raise, concluding long-standing talks with investors in the round which had been delayed since November.



As part of the round, Barclays has invested an undisclosed sum somewhere in the &#8220;millions of dollars,&#8221; <a href="https://news.sky.com/story/barclays-snaps-up-stake-in-2bn-cryptocurrency-firm-copper-12658295" target="_blank" rel="noreferrer noopener">Sky News</a> reported Sunday. It is expected the raise will be finalized in the coming days.



It concludes a more than nine-month delay to its $500 million Series C funding round where Copper had sought a <a href="https://www.bloomberg.com/news/articles/2021-11-18/crypto-trading-firm-copper-seeks-funds-valuing-it-at-3-billion#xj4y7vzkg" target="_blank" rel="noreferrer noopener">$3 billion valuation</a>. A declining crypto market and waning investor interest have reduced that figure to $2 billion.



Barclays became the first bank in the UK to support crypto, namely bitcoin, back in 2015 by coaxing charities to accept the nascent asset class as a form of donations. The bank has often had a checkered past with the industry including denying its services to powerhouse exchange providers Binance and Coinbase.



Delays stemming from Copper&#8217;s bout with the UK&#8217;s Financial Conduct Authority over the country&#8217;s <a href="https://www.fca.org.uk/firms/financial-crime/cryptoassets-aml-ctf-regime#revisions" target="_blank" rel="noreferrer noopener">Temporary Registration Regime</a> had muddied investor proceedings, including with recurring investor Tiger Global.



<a href="https://www.theguardian.com/politics/2022/apr/17/cryptocurrency-firm-linked-to-philip-hammond-still-lacks-uk-approval-copper-technologies" target="_blank" rel="noreferrer noopener">Frustrations</a> over the UK financial watchdog&#8217;s rule, which required digital asset service providers to apply for temporary registration in order to continue trading, reached a fever pitch in March when Copper set up a hub in <a href="https://zg.chregister.ch/cr-portal/auszug/auszug.xhtml?uid=CHE-477.629.838#" target="_blank" rel="noreferrer noopener">Zug, Switzerland</a> following a partnership with global traditional custodian State Street.



Founded by Dmitry Tokarev in 2018, Copper provides custody, prime broking and settlement services to institutional investors. The firm previously raised $50 million via a <a href="https://copper.co/insights/crypto-scaleup-copper-co-secures-50-million-series-b-investment-co-led-by-dawn-capital-and-target-global" target="_blank" rel="noreferrer noopener">Series B</a> funding round in June of last year with an undisclosed valuation.



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Start your day with top crypto insights from David Canellis and Katherine Ross. <a href="https://blockworks.co/newsletter/empire">Subscribe to the Empire newsletter</a>.



Explore the growing intersection between crypto, macroeconomics, policy and finance with Ben Strack, Casey Wagner and Felix Jauvin. <a href="https://blockworks.co/newsletter/onthemargin">Subscribe to the Forward Guidance newsletter</a>.



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Barclays Takes Punt on Crypto Firm Copper in Latest Funding Round

Morgan Chittum

<div id="highlights-block_60c9fc7f1690b" class="highlights">
 <ul>
 <li>The US 10-year dipped under 1.35%, the lowest it has been since February.</li>
 <li>Barclays banned UK customers from making payments with their bank cards to Binance.</li>
 </ul>
 
</div>



Oil trading is volatile after an OPEC+ crisis left investors wondering if production would rise or not.



The commodity benchmarked a six-year high then tumbled after the alliance&#8217;s joint committee cancelled their meeting on Monday. Many blame infighting between the United Arab Emirates and Saudi Arabia over how to measure production cuts as the catalyst for the spat that resulted in a volatile trading session. 



Following the tension-filled days, Brent crude shed 3.4% to $74.53 a barrel after hitting a multi-year high of $77.84. West Texas Intermediate (WTI) plunged more than $3 a barrel, from $76.98 down to $73.37. This was the highest WTI had traded since 2014. &nbsp;



Prior to the conflict, oil had wrapped up its best half since 2009 and there were tentative plans to increase its output to compensate for surging demand in wealthier countries.&nbsp;



Silver and copper underperformed too, falling -0.95% and -0.42% respectively.



<h3 class="wp-block-heading">Commodities</h3>



<ul class="wp-block-list" id="block-d64d70c9-7052-4f1a-8167-3d370fe08354"><li>Brent crude is down to $74.83 a barrel, shedding -3.02%.</li><li>Gold is up 0.77% to $1,797.</li></ul>



<h3 class="wp-block-heading">Insight</h3>



“Crude oil has pulled a classic reversal today, trading to a seven-year high earlier in the session, but sliding by as much as 5.24% since then. OPEC+ failure to come to an agreement initially supported the market under the assumption that no deal would add zero barrels to the market through 2022,” said Bob Yawger, director of energy futures at Mizuho. “In just a few hours, that bullish assumption has started to give way to a fear that no deal might actually see the United Arab Emirates unilaterally add the 600,000 barrels they were seeking to their baseline quota, with other member countries also adding barrels [and] the potential for a repeat of the March 2020 price war.&#8221;



<div class="wp-block-image"><figure class="aligncenter size-large"><img loading="lazy" decoding="async" width="641" height="408" src="https://blockworks-co.imgix.net/wp-content/uploads/2021/07/FDC5FE13-D1E3-49F8-A352-4770092E9753.jpeg" alt="" class="wp-image-5345" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2021/07/FDC5FE13-D1E3-49F8-A352-4770092E9753.jpeg?w=641 641w, https://blockworks-co.imgix.net/wp-content/uploads/2021/07/FDC5FE13-D1E3-49F8-A352-4770092E9753.jpeg?w=300 300w, https://blockworks-co.imgix.net/wp-content/uploads/2021/07/FDC5FE13-D1E3-49F8-A352-4770092E9753.jpeg?w=404 404w, https://blockworks-co.imgix.net/wp-content/uploads/2021/07/FDC5FE13-D1E3-49F8-A352-4770092E9753.jpeg?w=410 410w, https://blockworks-co.imgix.net/wp-content/uploads/2021/07/FDC5FE13-D1E3-49F8-A352-4770092E9753.jpeg?w=344 344w, https://blockworks-co.imgix.net/wp-content/uploads/2021/07/FDC5FE13-D1E3-49F8-A352-4770092E9753.jpeg?w=80 80w" sizes="auto, (max-width: 641px) 100vw, 641px" /><figcaption> </figcaption></figure></div>



Bond yields dropped on Tuesday. The US 10-year dipped under 1.35%, the lowest it has closed since February. The 30-year bond fell below 2%, a two-week low for the long-term note.&nbsp;



The ISM Services Index slowed after a record high in May, data released Tuesday indicated. As treasury notes hit intraday lows, this left many to question if economic growth will follow suit. 



<h3 class="wp-block-heading">Fixed Income</h3>



<ul class="wp-block-list"><li>The US 10-year yields 1.34% as of 4:00 pm ET.</li></ul>



<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="1024" height="575" src="https://blockworks-co.imgix.net/wp-content/uploads/2021/07/88083ABD-14E5-4CBE-AB95-85AA977C61C7-1-1024x575.jpeg" alt="" class="wp-image-5352" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2021/07/88083ABD-14E5-4CBE-AB95-85AA977C61C7-1-1024x575.jpeg?w=1024 1024w, https://blockworks-co.imgix.net/wp-content/uploads/2021/07/88083ABD-14E5-4CBE-AB95-85AA977C61C7-1-1024x575.jpeg?w=300 300w, https://blockworks-co.imgix.net/wp-content/uploads/2021/07/88083ABD-14E5-4CBE-AB95-85AA977C61C7-1-1024x575.jpeg?w=768 768w, https://blockworks-co.imgix.net/wp-content/uploads/2021/07/88083ABD-14E5-4CBE-AB95-85AA977C61C7-1-1024x575.jpeg?w=428 428w, https://blockworks-co.imgix.net/wp-content/uploads/2021/07/88083ABD-14E5-4CBE-AB95-85AA977C61C7-1-1024x575.jpeg?w=465 465w, https://blockworks-co.imgix.net/wp-content/uploads/2021/07/88083ABD-14E5-4CBE-AB95-85AA977C61C7-1-1024x575.jpeg?w=389 389w, https://blockworks-co.imgix.net/wp-content/uploads/2021/07/88083ABD-14E5-4CBE-AB95-85AA977C61C7-1-1024x575.jpeg?w=80 80w, https://blockworks-co.imgix.net/wp-content/uploads/2021/07/88083ABD-14E5-4CBE-AB95-85AA977C61C7-1-1024x575.jpeg?w=1084 1084w" sizes="auto, (max-width: 1024px) 100vw, 1024px" /><figcaption> </figcaption></figure>



US stocks halted rallies mostly, ahead of FOMC minutes on Wednesday and the looming rise of the Delta-variant of Covid-19.



<h3 class="wp-block-heading">Equities</h3>



<ul class="wp-block-list"><li>The Dow was little changed, down -0.60% to 34,577.</li><li>S&amp;P 500 shed -0.20% to 4,343.</li><li>Nasdaq was up 0.17% to 14,663.</li></ul>



<h3 class="wp-block-heading">Crypto</h3>



<ul class="wp-block-list" id="block-1209f037-00c3-4876-ad37-a29ab610c717"><li>Bitcoin is trading around $33,892.14, shedding -0.57% in 24 hours at 4:00 pm ET.</li><li>Ether is trading around $2,307.83, up 2.84% in 24 hours at 4:00 pm ET.&nbsp;</li><li>ETH:BTC is at 0.068, up 4.39% at 4:00 pm ET.</li><li>VIX is up 9.09% to 16.44 at 4:00 pm ET.</li></ul>



<h3 class="wp-block-heading">Currencies</h3>



<ul class="wp-block-list"><li>The US dollar strengthened 0.35%, according to the Bloomberg Dollar Spot Index.</li></ul>



<h3 class="wp-block-heading">In other news&#8230;</h3>



Binance took another regulatory hit. Barclays banned UK customers from making payments with their credit and debit cards to the massive crypto exchange, the bank announced on Monday. Last month, the Financial Conduct Authority <a href="https://cms.blockworks.co/uk-fca-binance-ban-not-prohibiting-british-traders/" target="_blank" rel="noreferrer noopener">said</a> it would ban all exchanges on Binance Market Limited, a subsidiary of Binance, in the UK as well. 



<h2 class="wp-block-heading">We’re watching out for …</h2>



<ul class="wp-block-list"><li>FOMC minutes will be released on Wednesday.</li><li>20 central bankers and finance ministers will meet on Friday.</li></ul>



That&#8217;s it for today&#8217;s markets wrap. I&#8217;ll see you back here tomorrow.