First DeFi trade executed on public blockchain by JP Morgan

Key points:

• Multinational banking firm JPMorgan Chase has successfully completed its first cross-border decentralized finance (DeFi) transaction on a public blockchain.
• The transaction was executed on Ethereum's Polygon Layer 2 network using a modified version of the Aave protocol smart contract code.
• The Boston Consulting Group estimated in a September 2022 report that the total size of tokenized illiquid assets will reach $16.1 trillion by 2030.

Multinational banking firm JPMorgan Chase has successfully completed its first cross-border decentralized finance (DeFi) transaction on a public blockchain.

The Monetary Authority of Singapore’s (MAS) Project Guardian facilitated the transaction on Nov. 2 as part of a pilot program to “explore potential applications of decentralized finance (DeFi) in wholesale funding markets.”

In other words, the pilot is another step in exploring how traditional financial institutions can use tokenized assets and DeFi protocols for financial transactions and more.

Also participating in the pilot program are DBS Bank, Singapore's largest bank, Bank of Tokyo company SBI Digital Asset Holdings, and the corporate governance platform Oliver Wyman Advisory Forum.

The transaction was executed on Ethereum's Polygon Layer 2 network using a modified version of the Aave protocol smart contract code.

MAS said it conducted "real-time cross-currency trading" involving tokenized deposits in Singapore dollars and Japanese yen, as well as exercises simulating the buying and selling of tokenized government bonds.

Tyrone Lobban, head of the blockchain startup and Onyx digital assets at JPMorgan’s Onyx business unit, shared the news on Twitter on Nov. 2, noting that the SGD tokenized deposit is the first time a bank has issued a tokenized deposit.

WORLD! J.P. Morgan has executed its 1st *LIVE* trade on public blockchain using DeFi, Tokenized Deposits & Verifiable Credentials, part of @MAS_sg Project Guardian https://t.co/XI212SG4zg Many world 1sts here, & since this is public ⛓ here’s a transparenton what we did:

— Ty Lobban (@TyLobban) November 2, 2022

MAS chief fintech officer Sopnendu Mohanty said this was an “important step” towards a more efficient financial network, with the recent pilot helping to shape the country’s digital asset strategy, commenting:

“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, CEO of JPMorgan’s Onyx, told Bloomberg on Nov. 2 that JPMorgan’s Onyx deal “is the first time a large bank, possibly even a bank, has token deposits on a public blockchain.”

DeFi lending protocol Aave also commented on the new pilot, adding that DeFi trading is an “important milestone” for the industry as it “represents a big step in connecting traditional financial assets with DeFi.”

Project Guardian was first officially launched in May. 2022 comes about a month after JPMorgan and DBS formed a partnership to build a new blockchain interbank platform to complement central bank digital currencies (CBDCs).

The milestone comes as many of the largest financial players predict a major event in the tokenization of blockchain-based real-world assets.

The Boston Consulting Group estimated in a September 2022 report that the total size of tokenized illiquid assets will reach $16.1 trillion by 2030.

While Cynthia Wu, COO of digital asset service platform Matrixport recently told that "almost anything can be tokenized in 5 to 10 years" and that non-fungible tokens may be the vehicle used to represent off-chain assets. Examples include real estate deeds, stocks and bonds.