First Defi Trade Is Carried Out By JP Morgan on a Public Blockchain
Multinational financial corporation JP Morgan completed its first cross-border transaction using decentralized finance (DeFi) on a public blockchain.
On Nov. 2, the trade was made possible by Project Guardian, a pilot program run by the Monetary Authority of Singapore (MAS) to research potential decentralized finance (DeFi) uses in wholesale funding markets.
In addition, the pilot was another step into examining how traditional financial institutions can conduct financial transactions using tokenized assets and DeFi protocols.
DBS Bank And Others Participated in Pilot Project
DBS Bank, the biggest bank in Singapore, SBI Digital Asset Holdings, a banking company based in Tokyo, and Oliver Wyman Forum, a business leadership platform, all participated in the pilot project.
A modified smart contract code from the AAVE protocol was used to carry out the trade on the Ethereum layer-2 network Polygon.
In addition to a simulated exercise of purchasing and selling tokenized government bonds, the MAS reported that a real cross-currency transaction involving tokenized Singaporean Dollar and Japanese Yen deposits was also carried out.
The news was announced on Twitter on November 2 by Tyrone Lobban, Head of Blockchain Launch and Onyx Digital Assets at JP Morgan’s Onyx business unit. He noted that the tokenized SGD deposits were the first issue of tokenized deposits by a bank.
WORLD! J.P. Morgan has executed its 1st *LIVE* trade on public blockchain using DeFi, Tokenized Deposits & Verifiable Credentials, part of @MAS_sg Project Guardian 🙌🚀🔥https://t.co/XI212SG4zg Many world 1sts here, & since this is public ⛓ here’s a transparent🧵on what we did:
— Ty Lobban (@TyLobban) November 2, 2022
According to MAS Chief FinTech Officer Sopnendu Mohanty, the latest trial has helped build the country’s digital asset strategy and is a big step towards more efficient financial networks.
“The live pilots led by industry participants demonstrate that with the appropriate guardrails in place, digital assets and decentralized finance have the potential to transform capital markets.”
First Large Banks to Tokenized Deposits on a Public Blockchain
JP Morgan’s blockchain transaction was the first time a large bank tokenized deposits on a public blockchain, according to Umar Farooq, CEO of Onyx by JP Morgan, a business unit within the asset management company that focuses on blockchain technology.
Lending procedure for DeFi AAVE also weighed in on the new pilot, saying the DeFi trade is a huge milestone for the sector because it represents a massive step towards connecting traditional financial assets.
5/5 @jpmorgan transacting on a public blockchain using Aave smart contracts is a huge milestone for DeFi, and represents a massive step towards bringing traditional financial assets into DeFi, to fully realize the opportunities afforded by smart contract based dApps.
— Aave (@AaveAave) November 2, 2022
The first public launch of Project Guardian occurred in May 2022, around a month after JP Morgan and DBS announced their agreement to create a new blockchain interbank platform to support central bank digital currencies (CBDCs).
Blockchain Future, Tokenizing Everything in 5-10 Years
As many of the most prominent financial players predicted, tokenizing real-world assets using blockchain technology will lead to great things in the future.
In a report released in September 2022, Boston Consulting Group predicted that the entire value of tokenized illiquid assets would reach $16.1 trillion by 2030.
In contrast, Cynthia Wu, COO of digital asset service platform Matrixport also stated that virtually anything might be tokenized in 5-10 years and that nonfungible tokens (NFTs) could be the tool used to represent off-chain assets like real estate titles, stocks, and bonds.