JP Morgan executes first DeFi trade on public blockchain

The MAS chief financial officer said that the successful test was a "big step" towards enabling more efficient and integrated global financial networks.

FILE PHOTO: A sign outside the headquarters of JP Morgan Chase & Co in New York, September 19, 2013. REUTERS/Mike Segar/File Photo

JP Morgan has successfully completed a cross-border transaction using decentralized finance (DeFi) on a public blockchain.

On 2 November 2017, the Monetary Authority of Singapore (MAS) launched a Project Guardian initiative to explore potential decentralized finance applications in wholesale funding markets.

The pilot is an important step in exploring how traditional financial institutions can use tokenized assets and DeFi protocols to conduct financial transactions, among other potential uses.

The pilot program involved the participation of Singapore’s largest bank, DBS Bank, Tokyo-based banking firm SBI Digital Asset Holdings, and business leadership platform Oliver Wyman Forum. All three organizations are experts in their field and are responsible for helping businesses grow and succeed.

The trade was successfully executed on the Ethereum layer-2 network Polygon, using a modified version of the Aave protocol’s smart contract code.

MAS said that a live cross-currency transaction was conducted, involving tokenized Singaporean dollar and Japanese yen deposits, along with a simulated exercise of buying and selling tokenized government bonds. This demonstrates the potential of the platform and the potential for future growth.

Chief Fintech Officer Sopnendu Mohanty said the latest pilot has helped develop the country’s digital asset strategy. He said it was a big step forward 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.”

Umar Farooq, the CEO of Onyx by JP Morgan, said that their on-chain transaction was the first time that a major bank, possibly any bank, had tokenized deposits on a public blockchain.

DeFi lending protocol Aave also commented on the new pilot, adding that the DeFi trade is a “huge milestone” for the industry as it “represents a massive step towards bridging traditional financial assets into DeFi.”

Project Guardian was first officially launched in May 2022, which came about a month after a partnership was made between JP Morgan and DBS to build a new blockchain interbank platform to complement the work of central bank digital currencies (CBDCs).

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