J.P. Morgan's digital assets platform Onyx to test tokenized wealth management services with Avalanche

According to a report released by J.P. Morgan and global asset management firm Apollo, the two parties will conduct a Proof of Concept (PoC) to explore how tokenization technology can optimize wealth management. This service may serve as one of the new initiatives under the future blockchain platform Onyx.

J.P. Morgan Continues to Invest in the Crypto Industry

What is Onyx?

Onyx is the cryptocurrency asset service platform under J.P. Morgan, offering a range of services that leverage blockchain technology to optimize existing financial systems. Onyx's blockchain technology is built on the enterprise-grade blockchain protocol Quorum, which was previously developed and open-sourced by J.P. Morgan and has since been acquired by Consensys.

Currently, Onyx primarily serves financial institutions, providing services including:

• Liink: A network that enables banks to securely and efficiently exchange information.
• Coin Systems: Stablecoin JPM Coin and its related applications such as settlements.
• Onyx Digital Assets: Assisting financial institutions in tokenizing certain assets, RWA, and related services.
• Blockchain Launch: Assisting traditional institutions in building blockchain services.

These products have been gradually rolled out and have shown promising results. The daily trading volume of JPM Coin has recently exceeded $1 billion, and Onyx Digital Assets service has facilitated $950 billion worth of U.S. Treasury bond transactions. Currently, Liink has partnered with over 400 banks.

J.P. Morgan Boldly Ventures into the Crypto Space

Compared to other traditional financial institutions, J.P. Morgan has been at the forefront of the blockchain industry, which is a relatively rare case. The company has recently introduced token programming services, enabling the execution of more complex automated payment mechanisms in the future.

J.P. Morgan has even purchased land in the metaverse project Decentraland and established a virtual exhibition space called the Onyx Lounge. These initiatives demonstrate the company's optimism and expectations for industry trends.

However, the Onyx team has clarified that they will ultimately comply with regulatory requirements when launching and modifying all related products. Therefore, the current actions are primarily experimental in nature.

Concept Testing for Tokenized Asset Management

Project Guardian

Yesterday, J.P. Morgan announced that its blockchain platform Onyx will collaborate with asset management company Apollo under the Monetary Authority of Singapore's Project Guardian initiative to explore a new service - tokenized asset management service.

Project Guardian aims to test the opportunities and risks of cryptocurrencies and conduct a series of experimental activities similar to the Digital Assets Sandbox, inviting enterprises to test potential use cases of digital tokens. Participating companies include well-known traditional financial institutions in Taiwan such as HSBC, Standard Chartered, and Cathay United Bank.

Potential of Tokenized Asset Management for Alternative Investments

Wealth management refers to asset management companies assisting wealthy individuals and institutions with comprehensive financial planning and financial services to help clients preserve, grow assets, and engage in inheritance, typically investing in highly liquid public market assets such as U.S. Treasuries, funds, and other major investment products suitable for passive low-risk investments.

Traditional investment portfolios often lack allocations for Alternative Investments such as private equity, private credit, real estate, and infrastructure due to the complexity and intensive operations involved, making it challenging for investors with specific needs to access these types of investments.

This project aims to establish channels and tools for alternative asset investment using blockchain and tokenization technology based on Onyx.

Concept Verification Execution

Participants in this project are expected to include leading traditional financial companies such as J.P. Morgan, Apollo, and WisdomTree, as well as a series of well-known Web3 projects like Avalanche, LayerZero, Axelar, Oasis Pro, Provenance, and Biconomy, garnering significant market attention.

In addition to Onyx, the project will also test multi-chain application scenarios to explore tokenized asset interaction modes beyond the Consensys Quorum-based blockchain. Multiple chains are expected to connect more investment targets efficiently in the future. Therefore, this proof of concept (PoC) also includes Avalanche's Evergreen network and Provenance Blockchain network, both private chain services derived for enterprise needs.

Interconnecting the cross-chain bridges in the network will involve technical support from LayerZero and Axelar. LayerZero will link Onyx to the licensed Avalanche Evergreen subnetwork, providing subscription and redemption services for WisdomTree tokenized assets, while Axelar will connect Onyx to the Provenance Blockchain network, facilitating operations for Apollo's tokenized assets.

For end-users, including investors and fund managers, Biconomy's Paymaster service will aim to provide account abstraction technology to enhance usability and user experience, enabling better asset allocation adjustments for investors and fund managers.

Concept Verification Results

While there are many technical and regulatory challenges to overcome, according to an announcement from Avalanche, the concept testing revealed the advantages of introducing tokenization mechanisms in asset management:

• Incorporating alternative investments into managed portfolios: Tokenizing alternative investments helps standardize the financing and settlement of traditional asset classes and alternative assets. Smart contracts can automate payments or update investor registration, simplifying the management of alternative investments and enabling asset management firms to include more products in portfolios.
• Efficiency and scalability: Deploying smart contracts representing managed portfolios proved that portfolios could automatically rebalance programmatically, increasing investment management efficiency.
• Expanded investment scope through cross-chain composability: Cross-chain protocols allow asset management firms to access tokenized assets on various blockchains without moving assets from their original networks, thus increasing efficiency.
• Enhanced blockchain user experience: By utilizing account abstraction concepts, the complexity of interacting with blockchains, including managing keys, paying blockchain transaction fees, or managing cross-chain asset management, can be simplified.

J.P. Morgan's Goal is to Improve Traditional Finance

J.P. Morgan leverages its strengths to create new products. The concept of incorporating blockchain technology into the wealth management industry is something only financial giants like J.P. Morgan and Apollo can attempt, but their true goal is to build a platform.

Currently, financial institutions are strategizing their approach to the crypto industry, with early movers having an advantage over more conservative competitors. These institutions aim to build digital asset platforms for existing clients, strengthening or maintaining their position in the financial industry. Apart from J.P. Morgan's Onyx, HSBC is also promoting its digital asset management platform HSBC Orion, and Cathay United Bank in Taiwan also has its own global trade finance blockchain, positioning their banks as leaders in the crypto industry.