JPMorgan Chase wants to make investing in alternative assets easier by offering them through digital tokens.
The banking giant said Thursday that it tokenized a private-equity fund on its blockchain platform, an offering that is available to the wealthy clients served by its private bank.
The move comes ahead of JPMorgan’s broader rollout next year of its fund tokenization platform, Kinexys Fund Flow.
Tokenization lets the bank offer clients a digital representation of the ownership of an asset that lives on a blockchain ledger.
Despite their past wariness of crypto, banks have long espoused the potential of the blockchain technology that underpins digital currencies to streamline their businesses. President Trump’s signing this summer of the Genius Act, which created a regulatory framework for tokenized dollars known as stablecoins, has fueled a wave of efforts to tokenize everything from individual stocks to funds and real assets.
In July, Goldman Sachs and Bank of New York Mellon said they are partnering to launch digital tokens that confer ownership of money-market funds managed by many of the biggest investment firms, including BlackRock and Fidelity Investments, as well as their own asset-management arms.
JPMorgan’s Kinexys Fund Flow platform collects data from fund managers, distributors and administrators, creates smart contracts representing fund ownership, and facilitates the near-instant exchanging of cash and assets on the blockchain.
“For the alternative investments industry, it’s just a matter of time that a blockchain-based solution is going to be adopted,” said Anton Pil, head of global alternative investment solutions for JPMorgan’s asset management arm. “It’s more about simplifying the ecosystem of alternatives and making it, frankly, a little easier to access for most investors.”
For example, a tokenized fund lets all parties share a single, real-time view of who owns what and who has paid up on their investment promises. That helps reduce the surprise that can come with “capital calls,” or the requests that private fund managers often make on short notice for investors to provide a portion of the capital they previously committed.
The tokenization of private funds could eventually expand investor access to the more complex, expensive and often-opaque investment vehicles that have long been in the domain of the elite.
JPMorgan expects to tokenize additional alternative investment strategies, including private credit, real estate, and hedge funds, in the future. The bank is also exploring the possibility of allowing clients to use fund tokens as collateral for borrowing or constructing a portfolio of tokenized assets.
Banks still face regulatory restrictions when it comes to blockchains, and mainly use private platforms that allow selected users in a closed ecosystem.
Write to Vicky Ge Huang at vicky.huang@wsj.com