JP Morgan carries out the first DeFi transaction on the public blockchain. The successful test, according to the MAS Chief Fintech Officer, was a significant step toward enabling more efficient and connected global financial networks.
cross-border transaction using decentralised finance (DeFi) on a public blockchain.
On November 2, the Monetary Authority of Singapore (MAS) launched Project Guardian as part of a pilot initiative to "research possible decentralised finance (DeFi) applications in wholesale funding markets."
In other words, the pilot was another step in investigating how traditional financial institutions, among other use cases, can employ tokenized assets and DeFi protocols to perform financial transactions.
The pilot program also included Singapore's largest bank, DBS Bank, Tokyo-based banking giant SBI Digital Asset Holdings, and business leadership platform Oliver Wyman Forum.
The transaction was carried out on the Ethereum layer-2 network Polygon, with a modified version of the AAVE protocol's smart contract code.
The MAS stated that a "live cross-currency transaction" involving tokenized Singaporean Dollar and Japanese Yen deposits, as well as a simulated exercise of purchasing and selling tokenized government bonds, was carried out.
Tyrone Lobban, Head of Blockchain Launch and Onyx Digital Assets at JP Morgan's Onyx business unit, announced the development on Twitter on November 2, stating that the tokenized SGD deposits were the first issued by a bank.
According to MAS Chief FinTech Officer Sopnendu Mohanty, the latest trial has helped build the country's digital asset strategy, and it is a "major step" towards more efficient financial networks.
The live pilots led by industry players show that digital assets and decentralised finance have the potential to change capital markets if the proper safeguards are in place.
Umar Farooq, CEO of "Onyx by JP Morgan" — an asset management firm that focuses on blockchain technology — told local media outlets on November 2 that JP Morgan's on-chain transaction was the first time a large bank, probably any bank, had tokenized deposits on a public blockchain.
DeFi lending protocol aave also weighed in on the new pilot, saying that the DeFi trade is a "major milestone" for the sector because it represents a significant step toward connecting traditional financial assets into DeFi.
The milestone comes as several of the world's major financial institutions have projected big things for blockchain-based tokenization of real-world assets.