JP Morgan & Apollo: Project Guardian, a blockchain-based proof of concept (PoC) for asset tokenization.
TL;DR
JP Morgan's Onyx and Apollo collaborated on Project Guardian, a blockchain-based proof of concept (PoC) for asset tokenization. This working solution allows portfolio managers to create, deploy, and manage portfolios efficiently. The initiative explores blockchain's transformative potential in automating and enhancing asset management by tokenizing portfolio assets. The PoC, conducted with leading asset managers and blockchain platforms like Axelar and Avalanche, focuses on interoperability.
Onyx, a partnership between JPMorgan and Apollo Global, has pioneered a proof of concept for Singapore's Project Guardian. The protocol connects Onyx Digital Assets to an Avalanche subnet, providing access to WisdomTree's tokenized funds, a significant advancement for the tokenization of traditional assets.
JP Morgan and Apollo Global collaborated on a groundbreaking blockchain proof of concept (PoC) as part of the Monetary Authority of Singapore’s Project Guardian tokenization trials. This innovative initiative aims to leverage blockchain to automate and personalize the discretionary portfolios of wealthy clients, operating within a staggering $5.5 trillion space.
The PoC delved into interoperability, testing the connection between JP Morgan’s Onyx Digital Asset platform and permissioned layers of public blockchains, including the Cosmos-based Provenance Blockchain and an Ethereum-compatible subnet on the Avalanche blockchain.
Fundamentally, the emphasis in fund tokenization has been on expanding the client base and enhancing liquidity. This PoC, however, extends its scope by enabling seamless inclusion of alternative assets alongside publicly traded ones. JP Morgan and Apollo foresee a substantial $400 billion revenue opportunity for alternative fund managers and distributors.
In the current landscape, wealth managers typically offer a limited list of approved alternative funds, requiring clients to handle paperwork and payments. Tokenization addresses this challenge, facilitating more efficient distribution of alternative funds through wealth managers.
Beyond revenue opportunities, the PoC uncovered key findings. For instance, the JP Morgan Crescendo prototype streamlined monthly rebalancing from 3,000 steps to a few clicks for a wealth manager with 100,000 portfolios. Real-time settlement emerged as a game-changer, potentially reducing the typical 3% cash holding in portfolios and yielding a benefit of 24 basis points, representing 20% of costs.
The PoC's operational mechanism involved Onyx's development of the Crescendo prototype for automated portfolio management. This system links discretionary portfolios to model portfolios, all residing on the Onyx Digital Assets ledger alongside the client’s tokenized cash balance.
JP Morgan Private Bank, Apollo, and WisdomTree tokenized their funds across three blockchains: Onyx Digital Assets (private, Ethereum-based), Provenance blockchain (public, permissioned zone, Cosmos-based), and a permissioned Avalanche subnet (Ethereum-compatible). Interoperability was facilitated by Axelar and LayerZero, connecting different blockchains seamlessly.
Smart contracts played a crucial role, automatically redeeming and subscribing to fund assets even when residing on separate blockchains. Existing relationships, like Christine Moy's transition from Onyx to Apollo, underscored the collaborative nature of this PoC, offering a glimpse into the transformative potential of blockchain in asset management.
Sources
jpmorgan.com - Project Guardian: asset tokenization
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