JP Morgan, a global financial institution, just finished carrying out the first cross-border transaction ever using decentralized finance (DeFi) on an open 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 other words, the pilot was a further step in studying how conventional financial institutions may conduct financial transactions using tokenized assets and DeFi protocols, among other use cases.
Oliver Wyman Forum, a corporate leadership forum, SBI Digital Asset Holdings, the largest bank in Singapore, DBS Bank, and other financial institutions participated in the pilot project.
Using a modified version of the smart contract code from the AAVE protocol, the deal was carried out on the Ethereum layer-2 network Polygon.
According to MAS, tokenized Singaporean Dollar and Japanese Yen deposits were used in a “live cross-currency transaction,” along with a practice exercise where tokenized government bonds were bought and sold.
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
MAS Chief FinTech Officer Sopnendu Mohanty said it was a “big step” towards more efficient financial networks, and the latest pilot has helped develop the country’s digital asset strategy, commenting:
“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.”
On Nov. 2, JP Morgan’s CEO of the blockchain-focused business unit “Onyx by JP Morgan,” Umar Farooq, told Bloomberg that the on-chain transaction “was the first time that a large bank, probably any bank, had tokenized deposits on a public blockchain.”
DeFi lending guidelines The DeFi trade is a “huge milestone” for the industry, according to AAVE, who also commented on the new pilot. It “represents a massive step towards bridging traditional financial assets into DeFi,” they continued.
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.
As many of the biggest financial players predicted, the tokenization of 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.
While Cynthia Wu, COO of digital asset service platform Matrixport, recently told Cointelegraph that nonfungible tokens (NFTs) might be the vehicle used to represent off-chain assets like real estate titles, stocks, and bonds, she also stated that “virtually everything could be tokenized in 5-10 years.”
