TLDR
- State Street becomes the first third-party custodian for JPMorgan’s Digital Debt Service.
The partnership allows State Street to hold blockchain-based debt securities for clients.
State Street successfully tested the platform with a $100M tokenized commercial paper transaction.
The collaboration marks a step forward for blockchain in traditional finance markets.
State Street, a global asset manager and custodian bank, has joined JPMorgan’s Digital Debt Service (DDS) platform as the first third-party custodian. This partnership allows State Street to hold blockchain-based debt securities, a move that highlights the growing integration of blockchain technology into traditional finance. By becoming the first custodian on JPMorgan’s platform, State Street can offer custody services for tokenized debt instruments, which are securities issued on the blockchain that represent government or corporate bonds.
This collaboration also marks a milestone for the tokenized real-world asset (RWA) sector. The tokenized debt market is gaining momentum, and this partnership signals the increasing involvement of established financial institutions in the digital economy. State Street’s involvement will provide clients with blockchain-based custody services that include automated settlement, lifecycle management, and reduced operational risks in debt markets.
Launch of the JPMorgan Digital Debt Service Platform
JPMorgan’s Digital Debt Service (DDS) is designed to facilitate the trade and settlement of tokenized debt instruments. These instruments are built on blockchain technology, allowing for faster and more secure transactions.
Through DDS, institutional clients can buy and sell tokenized debt products, and the platform offers features such as same-day settlement, automated corporate actions, and streamlined reporting. State Street’s role as a custodian as a result ensures that investors’ assets are safely held while benefiting from the advantages of blockchain technology.
State Street’s first test transaction on the DDS platform involved a $100 million commercial paper purchase from Oversea-Chinese Banking Corporation (OCBC), one of Southeast Asia’s oldest banks. This successful transaction further demonstrates the functionality and efficiency of JPMorgan’s blockchain-powered platform.
Tokenized Debt Market Transformation
The use of blockchain technology in debt securities is transforming the way the traditional fixed income markets operate. By tokenizing debt securities, such as government or corporate bonds, the settlement process becomes faster, reducing settlement time from days to mere minutes.
The use of smart contracts for corporate actions as a result ensures that all actions related to the securities, such as interest payments or bond redemptions, are handled automatically. This process reduces the manual workload and associated errors in traditional debt markets.
Moreover, tokenization provides increased transparency, as transactions are recorded on the blockchain, making it easier for market participants to track ownership and verify transactions. By adopting these blockchain capabilities, State Street and JPMorgan are consequently helping to streamline the financial markets, enabling institutional investors to access more efficient, cost-effective solutions.
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