Today, DBS Bank of Singapore announced that it had executed its first intraday repurchase transaction using JP Morgan’s Onyx Digital Assets network powered by blockchain technology. Banks use repurchase agreements (repos) for short-term financing by selling securities such as US Treasuries and agreeing to repurchase them later.

Repos are a massive market with over $4 trillion in US dollar repos in circulation at any one time.

Since repos are intended for short-term funding, the drawback is that settlement usually takes two days. Distributed ledger technology (DLT), with its instant settlement or delivery versus payment (DvP), makes it practical to have repo transactions that last a few hours instead of a day or more. Blockchain is powering other types of intraday funding, including exchanges.

Andrew Ng, Head of Treasury and Markets at DBS, said that for repos, “technical and infrastructure inefficiencies meant that the minimum term has generally been one day. In the past, banks around the world had to explore alternative routes for intraday funding requirements. By leveraging the efficiencies of a blockchain-based solution, we are able to raise funds in USD in short timeframes that are beneficial for our liquidity needs.”

In the case of Onyx Digital Assets, in addition to tokenizing the security of the repository, the DLT repository solution also uses JPM Coin, its blockchain-based bank account, to enable instant settlement.

DBS Bank is the first Asian bank to use the repo solution. Other announced participants include Goldman Sachs and BNP Paribas. When BNP Paribas joined in May, cumulative transactions had reached $300 billion since launching in December 2020.

“This is the first time that JP Morgan has acted as a tripartite agent and collateral token agent, which is an exciting development for the market,” said Ed Bond, director of Asia Pacific trading services at JP Morgan.

Unpacking the Ed Bond statement, tripartite brokers are typically custodians who help with collateral management, such as calculating margin requirements and settlement, including delivering securities when a transaction is complete. Collateral would be the underlying security in the repo transaction, such as a US Treasury.

When the collateral is tokenized, an independent party is needed to take the collateral from the real world, immobilize it, and tokenize it. And vice versa, if security is moved outside of the DLT platform. That tethering and tokenization is the role of the Token Collateral Agent.

Meanwhile, DBS Bank and JP Morgan’s Onyx unit have a close relationship. Both are patrons of Partior, the Singapore-based blockchain payments network that is also backed by Temasek and Standard Chartered. And they are participating in the Monetary Authority of Singapore’s Project Guardian exploring DeFi for financial institutions.