JP Morgan, an international banking company, has completed the first cross-border transaction ever utilizing decentralized finance (DeFi) on a public blockchain. On the Polygon Layer-2 blockchain employing a modified version of the Aave protocol’s smart contract code, JP Morgan issued 100,000 tokenized Singapore dollars (or $71,000) during the transaction. Then, JP Morgan swapped the tokenized Singapore dollars for tokenized Japanese yen, with Tokyo-based banking firm SBI Digital Asset Holdings on the opposite end of the transaction.
The first-ever industry pilot transaction was made possible on November 2 by the Project Guardian of the Monetary Authority of Singapore (MAS). Project Guardian investigates possible decentralized finance (DeFi) uses in the wholesale funding market. In other words, the pilot marked a new step in researching the many use cases for tokenized assets and DeFi protocols, including how traditional financial institutions could conduct financial transactions. The pilot program also included participation from Oliver Wyman Forum, a corporate leadership platform, and DBS Bank, the largest bank in Singapore.
The exchange was not strictly a cryptocurrency transaction because the parties utilized virtual representations of fiat currencies, but it still exemplifies how actively big financial institutions are embracing blockchain technology.
According to MAS Chief Fintech Officer Sopnendu Mohanty, the latest pilot has contributed to developing the nation’s digital asset strategy. He noted that live pilots led by industry participants exhibit how, with the right safeguards in place, digital assets and decentralized finance have the potential to transform capital markets.
Umar Farooq, CEO of Onyx by JP Morgan, a blockchain-focused business unit inside the asset management firm, informed Bloomberg that JPMorgan’s on-chain transaction was the first time that a large bank, probably any bank, has tokenized deposits on a public blockchain.
A whitepaper that summarizes the key learnings from this pilot program was published by Oliver Wyman Forum in collaboration with DBS Bank, JP Morgan, and SBI Digital Asset Holdings. The paper includes the advantages of digital asset interoperability and transaction efficiency that institutional DeFi protocols can introduce to financial markets,
Aave believes that the pilot represents a significant step toward linking traditional finance assets to DeFi as DeFi is set to bring a turning point for the industry.