In a significant move, banking heavyweight JPMorgan Chase has launched its blockchain-based collateral settlement system – the Tokenized Collateral Network (TCN). The system, created to facilitate over-the-counter derivatives trades, was first utilized by Blackrock, the world's largest asset manager. Blackrock leveraged the TCN to convert shares from one of its money market funds into digital tokens, which were then used as collateral in a trade with Barclays Plc.
JPMorgan Introduces its First Blockchain-Based Collateral Settlement
As per a report by Bloomberg, JPMorgan Chase & Co. has successfully ushered in its maiden blockchain-based collateral settlement for clients. Tyrone Lobban, the head of Onyx Digital Assets at JPMorgan, disclosed in an interview that Blackrock utilized the TCN to digitally tokenize shares from one of its money market funds. These digitized tokens were then employed as collateral in a derivatives trade with Barclays Plc.
"Blackrock and Barclays have now integrated with TCN, an application that is part of J.P. Morgan’s Onyx Digital Assets platform. This platform operates as a private blockchain, facilitating tokenized asset movements including collateral settlements," detailed a press release from JPMorgan. The bank's website further elaborates:
The Tokenized Collateral Network (TCN) is an application that allows investors to use assets as collateral. It enables the transfer of collateral ownership without moving assets in underlying ledgers – allowing investors to remain invested – beginning with money market funds.
Lobban further elaborated on the benefits of JPMorgan's blockchain network, Onyx Digital Assets. He stated that the network allows for near-instantaneous collateral transfers. When scaled, this technology could significantly enhance efficiency by freeing up tied capital and making it available for ongoing transactions. The bank conducted a trial run of the TCN with an internal transaction in May.
Expanding the Scope of Assets for Collateral
Ed Bond, JPMorgan's Head of Trading Services, indicated that the bank aims to extend the application's functionality to enable clients to use a diverse range of assets as collateral, comprising of equities and fixed income. He highlighted that the bank already has an array of clients and transactions lined up for the TCN, stating:
The network allows institutions to utilize a broader spectrum of assets to meet any collateral requirements they may have stemming from trading.
Tom McGrath, the deputy Global Chief Operating Officer of the Cash Management Group at Blackrock, opined, "Money market funds are crucial in supplying liquidity to investors during periods of intense market volatility." He further added:
The process of tokenizing money market fund shares as collateral in clearing and margining transactions could significantly reduce the operational strain of meeting margin calls when market segments face severe margin pressures.
What are your thoughts on JPMorgan's Tokenized Collateral Network? We would love to hear your views.
Frequently Asked Questions
What tax is gold subject in an IRA
The tax on the sale of gold is based on its fair market value when sold. Gold is not subject to tax when it's purchased. It is not income. If you sell it later you will have a taxable profit if the price goes down.
Loans can be secured with gold. When you borrow against your assets, lenders try to find the highest return possible. In the case of gold, this usually means selling it. The lender might not do this. They might just hold onto it. Or, they may decide to resell the item themselves. You lose potential profits in either case.
In order to avoid losing your money, only lend against your precious metal if you plan to use it to secure other collateral. Otherwise, it's better to leave it alone.
Who owns the gold in a Gold IRA?
The IRS considers anyone who owns gold to be “a form money” and therefore subject to taxation.
This tax-free status is only available to those who have owned at least $10,000 of gold and have kept it for at minimum five years.
While gold may be a great investment to help prevent inflation and volatility in the market, it's not wise to keep it if you won't use it.
If you plan on selling the gold someday, you'll need to report its value, which could affect how much capital gains taxes you owe when you cash in your investments.
To find out what options you have, consult an accountant or financial planner.
What should I pay into my Roth IRA
Roth IRAs can be used to save taxes on your retirement funds. You can't withdraw money from these accounts before you reach the age of 59 1/2. However, if your goal is to withdraw funds before that time, there are certain rules you must observe. First, you cannot touch your principal (the original amount deposited). No matter how much money you contribute, you cannot take out more than was originally deposited to the account. You must pay taxes on the difference if you want to take out more than what you initially contributed.
The second rule says that you cannot withdraw your earnings without paying income tax. Also, taxes will be due on any earnings you take. Let's assume that you contribute $5,000 each year to your Roth IRA. Let's also assume that you make $10,000 per year from your Roth IRA contributions. On the earnings, you would be responsible for $3,500 federal income taxes. You would have $6,500 less. Since you're limited to taking out only what you initially contributed, that's all you could take out.
You would still owe tax on $1,500 if you took out $4,000 of your earnings. You would also lose half of your earnings because they are subject to another 50% tax (half off 40%). So, even though you ended up with $7,000 in your Roth IRA, you only got back $4,000.
There are two types of Roth IRAs: Traditional and Roth. Traditional IRAs allow you to deduct pretax contributions from your taxable income. When you retire, you can use your traditional IRA to withdraw your contribution balance plus interest. There are no restrictions on the amount you can withdraw from a Traditional IRA.
Roth IRAs don't allow you deduct contributions. After you have retired, the full amount of your contributions and accrued interest can be withdrawn. There is no minimum withdrawal requirement, unlike traditional IRAs. You don't have to wait until you turn 70 1/2 years old before withdrawing your contribution.
Statistics
- Gold is considered a collectible, and profits from a sale are taxed at a maximum rate of 28 percent. (aarp.org)
- You can only purchase gold bars at least 99.5% purity. (forbes.com)
- If you take distributions before hitting 59.5, you'll owe a 10% penalty on the amount withdrawn. (lendedu.com)
- (Basically, if your GDP grows by 2%, you need miners to dig 2% more gold out of the ground every year to keep prices steady.) (smartasset.com)
- The price of gold jumped 131 percent from late 2007 to September 2011, when it hit a high of $1,921 an ounce, according to the World Gold Council. (aarp.org)
External Links
law.cornell.edu
- 7 U.S. Code SS7 – Designation boards of trade as contract market authorities
- 26 U.S. Code SS 408 – Individual retirement account
investopedia.com
- Do You Need a Gold IRA to Get Retirement?
- What are the Options? Types, Spreads, Example and Risk Metrics
irs.gov
cftc.gov
How To
Investing in gold or stocks
These days, it might seem quite risky to invest your money in gold. The reason behind this is that many people believe that gold is no longer profitable to invest in. This belief stems from the fact that most people see gold prices being driven down by the global economy. They believe they would lose their money if they invested gold. There are many benefits to investing in gold. Here are some examples.
Gold is one of the oldest forms of currency known to man. There are records of its use going back thousands of years. It was used all around the world as a reserve of value. It is still used as a payment method by South Africa and other countries.
When deciding whether to invest in gold, the first thing you need to do is to decide what price per gram you are willing to pay. If you're interested in buying gold bullion, it is crucial that you decide how much per gram. If you don’t know what the current market price is, you can always call a local jewelry store and ask them their opinion.
Noting that gold prices have fallen in recent years, it is worth noting that the cost to produce gold has gone up. Although the price of gold has dropped, production costs have not.
You should also consider the amount of your intended purchase when considering whether you should buy or not. It is sensible to avoid buying gold if you are only looking to cover the wedding rings. It is worth considering if you intend to use it for long-term investment. If you sell your gold for more than you paid, you can make a profit.
We hope you have gained a better understanding about gold as an investment tool. It is important to research all options before you make any decision. Only after doing so can you make an informed decision.
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By: Kevin Helms
Title: Blackrock-Barclays Trade Enabled by JPMorgan's Blockchain-Based Collateral Network
Sourced From: news.bitcoin.com/jpmorgans-tokenized-collateral-network-facilitates-blackrock-barclays-trade/
Published Date: Fri, 13 Oct 2023 03:30:04 +0000
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