JPMorgan and Visa jump into ambitious tokenisation project in bullish sign for digital ledgers
This is because transforming a security such as a stock or a bond into a tokenised asset akin to Bitcoin promises to make it easier to process and trade. Tokenising these assets on a distributed digital ledger and recording them in a single record of account could improve settlement times and costs
In a major effort to upgrade the backbone of the global financial system, JPMorgan Chase and Visa have joined a project to test the feasibility of tokenising cash and other assets, SIFMA, a securities industry trade group announced Wednesday.
The project will also examine how such a system might fit in the financial regulatory regime that governs the markets and the global payment systems.
Tokenisation has emerged as a prime goal of influential players on traditional finance, such as BlackRock CEO Larry Fink, as well as crypto platforms like Berlin-based Swarm Markets.
This is because transforming a security such as a stock or a bond into a tokenised asset akin to Bitcoin promises to make it easier to process and trade. Tokenising these assets on a distributed digital ledger and recording them in a single record of account could improve settlement times and costs.
Tokenisation also holds promise for the Byzantine world of payments processing, where Visa and Mastercard, as well as PayPal, are giants.
The catch
The catch is that different assets behave in very different ways, and present contrasting risk and reward dynamics for users. A US Treasury bond, for instance, is a very different instrument than cash or stocks, each of which are processed and transmitted from market to market in their own systems.
SIFMA acknowledged this complexity and the challenge it poses for institutions.
