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(Kitco News) - JPMorgan, the largest bank by assets under management in the U.S., has formed a new partnership with six major Indian banks to launch a pilot program designed to test a blockchain-based platform for the settlement of interbank dollar transactions.
According to a report from Bloomberg, HDFC Bank, ICICI Bank, Axis Bank, Yes Bank and IndusInd Bank will be joining forces with JPMorgan’s banking unit at Gujarat International Finance Tec-City, also known as GIFT City, to trial the new platform that enables interbank settlement of U.S. dollar transactions.
“We will be running a pilot project for the next few months as we need to analyze banks’ experience,” said Kaustubh Kulkarni, senior country officer for India and vice chairman for the Asia Pacific region at JPMorgan.
This development comes as New Delhi is attempting to position GIFT City as an international financial hub and alternative trading center to places like Singapore and Dubai. As part of this effort, the Reserve Bank of India has also started a domestic non-deliverable forward market settled in dollars at GIFT City.
The goal of the new blockchain project is to expand the capacity of the existing settlement system, Kulkarni said, and the platform will allow the banks to process instant transactions 24 hours a day, seven days a week.
Under the current settlement system, transactions can take several hours to complete, and the service is not available on Saturdays, Sundays, or public holidays.
“By leveraging blockchain technology to facilitate transactions on a 24x7 basis, processing is instantaneous and enables GIFT City banks to support their own time-zone and operating hours,” said Kulkarni.
The pilot project is expected to be launched on Monday and will use JPMorgan’s Onyx blockchain platform – a permissioned version of Ethereum that is designed to handle wholesale payment transactions – once final approval from the International Financial Services Center Authority is received.
JPMorgan originally launched Onyx in 2020 to utilize blockchain technology to improve the quality of wholesale payment transactions. According to Tyrone Labbone, program head for Onyx, the platform is already being used by Goldman Sachs, DBS Bank and BNP Paribas, and another 15 banks and broker-dealers are looking to sign up.
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As of April 27, JPMorgan has processed almost $700 billion in transactions in short-term loans using its Onyx platform, Labbone said, and customers have been able to trade tokens that denote ownership rights to U.S. Treasurys as well as use blockchain bank accounts known as JPM Coin.
Moving forward, Labbone said JPMorgan plans to use Onyx to focus on tokenizing assets that are traditionally hard to finance, such as money-market funds, and will use them as collateral. Eventually, the plan is to expand Onyx to issue a wider range of blockchain-based assets, including private funds.
In February, JPMorgan announced its plans to open a crypto innovation lab in Athens, Greece, to foster development in blockchain technology, artificial intelligence (AI) and cryptography, and to build out blockchain-related capabilities in support of Onyx.
