JP Morgan believes it has uncovered a way for DeFi developers to profit from the yield potential of non-crypto assets.
Tyrone Lobban, the head of JPMorgan’s Onyx Digital Assets, spoke with CoinDesk at Consensus 2022 in Austin, Texas, about the bank’s institutional-grade DeFi ambitions and the potential value in tokenised assets.
Aave Arc and a recently announced collaboration with Siam Commercial Bank and Compound Treasury illustrate institutional DeFi by implementing know-your-customer rules on crypto’s permissionless lending pools.
Mr. Lobban believes that tokenizing US Treasurys or money market fund shares will enable them to be used as collateral in DeFi pools.
Mr Lobban continued, “The final goal is to integrate these trillions of dollars of assets into DeFi so that we can use these new mechanisms for trading, borrowing, and lending, but on the scale of institutional assets.”
Onyx Digital Assets sees two complementary parts to bringing bank-grade DeFi to fruition, according to him.
One component is JPMorgan’s blockchain-based collateral settlement system, which was recently expanded to include tokenized BlackRock money market fund shares.
The trade volume for this type of application on the Onyx Digital Assets blockchain, which is paid in the bank’s in-house digital token JPM Coin, has reportedly hit $350 billion, according to Mr Lobban.