Traditional financial institutions are becoming more involved in the crypto space as they leverage the blockchain technology to improve some of their activities.
Goldman Sachs uses JPMorgan’s private blockchain
US-based investment bank Goldman Sachs has carried out its first repo trade using JPMorgan’s private blockchain network. In a Bloomberg post yesterday, Goldman Sachs said it conducted the first trade on June 17. The transaction involved a tokenized version of a U.S. Treasury bond exchanged for JPMCoin.
According to the report, the transaction was completed in three hours and five minutes. Mathew McDermott, global head of digital assets for Goldman’s global markets division, declined to reveal how much was involved. However, he noted that Goldman Sachs sees this latest development as a pivotal moment for the digitization of transactional activity.
Repurchase agreements, known as repos, are a type of loan that involves financial institutions selling collateralized securities in a contract. The institutions proceed to repurchase the securities at an inflated price at a future date, usually overnight. Repo is beneficial to financial institutions as it allows them to borrow on the cheap.
Using blockchain technology has improved repo trading. With blockchain technology, the exact amount of time the banks took to complete the transaction can be determined. “We pay interest per the minute,” McDermott noted.
Banks expanding their presence in the crypto space
Traditional financial institutions are increasing their presence in the crypto market. They are using blockchain technology to improve some of their activities and also invest in cryptocurrency companies.
Goldman Sachs recently partnered with Galaxy Digital to provide cryptocurrency investment services to its clients. Galaxy Digital will serve as the liquidity provider and asset manager. JPMorgan has also increasingly become active in the cryptocurrency industry. The bank is currently searching for cryptocurrency-savvy candidates to fill certain roles in its digital unit.