JPMorgan tests crypto waters with tokenized transaction via Ondo Finance

JPMorgan Chase performed its first transaction on a public blockchain to facilitate the purchase of tokenized US treasuries through Ondo Finance's Layer-1 network and Chainlink's cross-chain technology.

JPMorgan settles first public blockchain transaction for tokenized treasuries

Financial services firm JPMorgan Chase has begun testing crypto payments using public blockchains. The firm settled payments for US tokenized treasuries via a Delivery versus Payment (DvP) test transaction on Ondo Finance, according to a press release on Wednesday.

The transaction, made in early May, involved transferring money between two accounts belonging to Kinexys, JPMorgan's blockchain division. The payments were settled on Ondo Chain's testnet, leveraging Chainlink's cross-chain orchestration infrastructure. Ondo's flagship tokenized Short-Term US Treasuries Fund (OUSG) served as the “asset leg” and Kinexys digital payments as the “payment leg.”

"By securely and thoughtfully connecting our institutional payments solution with both external public and private blockchain infrastructures seamlessly, we can offer our clients and the broader financial ecosystem a wider range of benefits and scalable solutions for settling transactions," said Nelli Zaltsman, Head of Platform Settlement Solutions at Kinexys.

DvP is a payment system for purchasing securities, like stocks or bonds. The process requires that payment be made before or at the same time a security is being delivered to reduce risks for both parties.

According to Ondo Finance, DvP transactions are hard to carry out in traditional finance due to fragmented systems and manual processes, which cause delays in settling trades and raise risks for both parties.

"In just the past decade, it is estimated that payment and settlement failures have cost market participants at least $914B+," Ondo Finance stated.

By utilizing blockchain technology, assets and payments can be exchanged simultaneously across chains, lowering individual risks. It also enhances automated workflow, boosting operational efficiency across all parts of the transaction. 

Although this isn't the first transaction performed by JPMorgan outside its private blockchain, it is the first time the firm is interfacing with a public blockchain.

The announcement comes as larger institutions are beginning to explore digital assets, including Morgan Stanley, which is reportedly developing a plan to offer crypto trading to its E*Trade users. Fidelity also announced that it has begun testing its own stablecoin.

"It is becoming increasingly clear to the world's institutions that they have a large addressable market in the public chain community," said Sergey Nazarov, co-founder of Chainlink.

ONDO and LINK are down 1% on Wednesday despite the positive updates from the announcement. The decline closely aligns with the wider real-world asset (RWA) sector, down 0.7% in the past 24 hours.