According to Singapore's central bank, “The live transactions executed under the first pilot demonstrate that cross-currency transactions of tokenized assets can be traded, cleared, and settled instantaneously among direct participants.”
Multinational banking firm, J.P. Morgan, has successfully executed its first-ever live trade using decentralized finance (DeFi) on a public blockchain. This first cross-border transaction by the bank is a monumental move towards incorporating cryptocurrencies.
The Head of Blockchain Launch and Onyx Digital Assets at J.P. Morgan, Tyrone Lobban, announced this in a tweet.
The Monetary Authority of Singapore's (MAS) Project Guardian facilitated the trade. The project was established as part of the pilot program to explore the potential applications of DeFi in wholesale funding markets.
Hence, the pilot was a move to investigate how traditional financial institutions can use tokenized assets and DeFi protocols to carry out financial transactions.
In a press release by the MAS,
“DeFi enables financial transactions to be performed by entities directly with one another using smart contracts, without financial intermediaries. The live transactions executed under the first pilot demonstrate that cross-currency transactions of tokenized assets can be traded, cleared, and settled instantaneously among direct participants.”
Singapore’s largest bank, DBS Bank, Tokyo-based banking firm, SBI Digital Asset Holdings, and business leadership platform, Oliver Wyman Forum, also participated in the first industry pilot trade.
Although the transaction was not necessarily a crypto trade, J.P. Morgan employed the infrastructures developed by several crypto firms.
First, the bank used Polygon blockchain for the trade. This was to utilize Ethereum’s cheap gas fees, which the bank needed for certain expensive operations around identity verification.
It also used a modified version of the Aave protocol to leverage its permissioned pools concept.
J.P Morgan used tokenized Singapore Dollar (SGD) deposits. It issued S$100,000 ($71,000) and traded it for tokenized Yen (JPY) with SBI Digital Asset Holdings.
The bank also used World Wide Web Consortium (W3C) for Verifiable Credentials to provide access to Aave and other DeFi protocols. It built an institutional wallet to ensure traders cannot access the company’s funds and only approved DeFi protocols can be used.
