Decentralized financial transaction on Ethereum Layer 2 blockchain.
JPMorgan has become the first traditional institution to execute the world’s first cross-border DeFi transaction on a public blockchain. This is intended to test the use of the DeFi network for traditional banks. The goal is efficient and integrated global financial markets through digital assets. The transaction was conducted in cooperation with Singapore’s DBS Bank, Japan’s SBI Digital, and the Singapore Exchange’s digital assets platform. Trading of tokenized Singapore dollar deposits as well as tokenized Japanese yen and tokenized government bonds was simulated, conducted on an Ethereum Layer 2 blockchain.
MAS Pilot Project
The Monetary Authority of Singapore’s (MAS) blockchain pilot, Project Guardian, provided the framework for the project, which will test the various ways the DeFi network and tokenized assets can be used by traditional financial institutions, according to the press release. According to the head of the blockchain program at JPMorgan, Tyrone Lobban, they chose the Polygon network because they wanted to use Ethereum technology to take advantage of the low transaction fees for the expensive operations around identity verification. In a modified version of Aave Arc, parameters such as exchange rates and interest rates were used in the loan pool. The tokenized Singapore dollar deposit (TSD) was used for the transaction because it was a native deposit token with “stable on-chain value without the scalability issues of stablecoins.”
For MAS Chief Fintech Officer Sopnendu Mohanty, the project is a “first major step towards more efficient and integrated global financial networks” with the aim of gaining a deeper understanding of the crypto ecosystem and further developing Singapore’s strategy to develop in the crypto sector, according to CryptoPotato. The goal for the future is to expand collaboration with international financial institutions.
Banks are jumping on the bandwagon
For diehard fans, it was always clear that blockchain technology was the future and that large corporations and government institutions would jump on the bandwagon sooner or later. That’s the view of Mikkel Morch, chairman of digital asset hedge fund ARK36, in a Forbes interview, “Crypto enthusiasts have never doubted that innovations from this space – especially DeFi innovations – have the potential to make international banking cheaper, faster and more efficient. Now the giants of traditional finance are beginning to confirm this by using DeFi protocols as a viable solution to streamline international money trading.”
What’s most surprising about all this is the protagonist: JPMorgan CEO Jamie Dimon had called cryptocurrencies a “digital Ponzi scheme” as recently as September. But even the biggest skeptics can no longer deny the undeniable benefits and future potential. And if you don’t move with the times, you move with the times….