JP Morgan has successfully completed its inaugural cross-border transaction using DeFi on a public blockchain. In doing so, the banking giant has begun paving the way for other banking and financial institutions to start using decentralized finance as a default infrastructure going forward.
On November 2nd, 2022, the Monetary Authority of Singapore (MAS) launched Project Guardian as part of a pilot program to explore potential DeFi applications in wholesale funding markets. To that end, the initiative was a vital step in investigating how traditional financial institutions, among various other use cases, can potentially utilize tokenized assets and DeFi protocols to successfully carry out financial transactions.
The pilot program was also attended by Singapores biggest bank (DBS Bank), SBI Digital Asset Holdings, and Oliver Wyman Forum. The transaction was carried out on the Ethereum Layer 2 network Polygon with the help of a modified version of the Aave protocols smart contract code. Furthermore, the MAS stated that a live cross-currency transaction incorporating tokenized Singaporean Dollar and Japanese Yen deposits, as well as a simulated exercise of purchasing and selling tokenized government bonds, was successfully carried out.
Additionally, Tyrone Lobban, JP Morgans Onyx business units Head of Blockchain Launch and Onyx Digital assets, stated that the tokenized Singapore dollar deposits became the first recorded instance of any bank issuing tokenized deposits.
What comes next?
According to MAS Chief Fintech Officer Sopnendu Mohanty, this is a huge step in the right direction, one that will significantly improve existing financial networks and help bridge the gap between them and DeFi. The CFO also said that the latest pilot has aided in the development of the countrys digital asset strategy as well.
Umar Farooq, CEO of Onyx by JP Morgan, a blockchain focused business unit within the asset management firm, claimed that JPMorgans on chain transaction on a public blockchain was nothing short of groundbreaking and will forever be known as a truly historic moment. The achievement comes as many top financial institutions have anticipated big things for blockchain oriented tokenization of real world assets.
Earlier in 2022, Boston Consulting Group predicted that the total value of tokenized illiquid assets would reach over $16 trillion by 2030. Popular DeFi lending protocol Aave also recently commented on the new pilot, calling it a monumental achievement for the industry because it indicates a gigantic step towards bringing traditional financial assets into DeFi.