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• Fidelity International joins JPMorgan’s Tokenized Collateral Network (TCN).
• The firm has tokenized shares of its money market fund through TCN.
• TCN operates on JPMorgan’s Onyx Digital Assets, a private Ethereum-based blockchain network.

In a significant move within the traditional financial sector, Fidelity International has joined JPMorgan’s Tokenized Collateral Network (TCN), as announced on Monday. This partnership represents a growing trend of established financial institutions embracing blockchain technology to enhance operational efficiencies and expand their service offerings.

Fidelity International, distinct from its U.S.-based counterpart, has taken a pioneering step by tokenizing shares of its money market fund (MMF) through TCN. The Tokenized Collateral Network operates on Onyx Digital Assets, JPMorgan’s private blockchain network that leverages Ethereum’s infrastructure. This development underscores the increasing integration of blockchain technology within mainstream finance.

The tokenization of MMF shares through TCN offers a significant advantage by allowing these shares to be posted as collateral directly, without the need to first convert them to cash. This capability promises enhanced efficiency in managing collateral. Initially, TCN has focused on tokenizing money market shares, but plans are in place to extend this tokenization across other asset classes, including equities and fixed income.

“The ability to tokenize assets and use them under both title transfer and pledge structures, outside of any limiting market operating hours, has the potential to create new opportunities in the collateral market,” a statement from the firms highlighted.

The first tokenized transaction on TCN occurred in October of last year, marking a milestone in the evolution of JPMorgan’s blockchain initiatives. The network was developed through a collaboration between JPMorgan’s trading services and Onyx Digital Assets, aiming to revolutionize the use of collateral in financial transactions.

Keerthi Moudgal, head of product at Onyx Digital Assets, expressed enthusiasm about Fidelity’s participation in TCN. “Fidelity’s participation in TCN brings its MMF units onto our network through tokenization, adding a new asset that is otherwise prohibitively complex to use across today’s collateral landscape,” Moudgal stated.

This partnership with JPMorgan’s TCN is not Fidelity International’s first foray into digital assets. The firm also offers a bitcoin exchange-traded product (ETP) on European exchanges, denoted by the ticker FBTC. It is important to note that this product is separate from any offerings by the U.S.-based Fidelity firm.

The broader implications of Fidelity International joining TCN are significant. By integrating its MMF shares into the tokenized network, Fidelity is contributing to the development of a more efficient and flexible financial ecosystem. This move highlights the growing importance of blockchain technology in traditional finance, particularly in the context of collateral management.

The TCN’s framework allows for tokenization under both title transfer and pledge structures, which could revolutionize the use of collateral by enabling transactions outside of traditional market operating hours. This flexibility is poised to create new opportunities and efficiencies in the collateral market, benefiting a wide range of financial activities.

“Tokenizing our money market fund shares to use as collateral is an important and natural first step in scaling our adoption of this technology. The benefits to our clients and the wider financial system are clear; in particular, the improved efficiency in delivering margin requirements and reduction in transaction costs and operational risk,” said Stephen Whyman, head of debt capital markets at Fidelity International.

On the US side of things, other traditional financial institutions have turned their attention to money market funds onchain.