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JPMorgan has participated in its first ever decentralized finance (DeFi) transaction, in partnership with Singapore’s central bank.
The transaction was one of a handful marking the launch of Project Guardian, according to the Monetary Authority of Singapore.
MAS said the aim of the pilot program is to understand how DeFi applications can be used in financial markets. It also served as an experiment in tokenizing assets and transferring them across borders.
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In addition to JPMorgan, Singapore bank DBS and SBI Digital Asset Holdings also participated in the pilot. According to MAS, the parties facilitated the transactions of tokenized assets, specifically Singapore and Japanese government bonds and currencies.
These trades utilized a modified version of DeFi protocol Aave, in addition to decentralized exchange Uniswap on the Polygon blockchain.
Although JPMorgan’s chief executive remains skeptical of cryptocurrencies, the company has been investing considerably in the underlying blockchain technology. Its blockchain focused arm, known as Onyx, participated in the pilot and recently collaborated with Visa.
Singapore Central Bank Finding Value in DeFi
Singapore’s central bank has seen significant value in DeFi for some time now, having announced Project Guardian in May 2022. In its recent announcement, it highlighted that DeFi enables direct financial transactions between entities, without the need for intermediaries.
MAS said these first live transactions of Project Guardian demonstrate that tokenized assets “can be traded, cleared and settled instantaneously”. According to the central bank, this streamlines a process which still requires the “management of bilateral counterparty trading relationships.”
In order to do so, MAS said that a trustworthy standard must be established, referring to theses mechanisms as “trust anchors”. These would essentially be verifiable credentials that financial institutions would issue to trading counterparties.
Plans for Future Pilots
On announcing Project Guardian earlier this year, MAS effectively solicited financial institutions to participate in various pilot projects. In addition to this initial successful pilot, MAS said it would be launching two additional industry pilots.
The first involves a similar transference of tokenized assets, but in this case would consist of other financial assets. MAS said it would collaborate with Standard Chartered Bank for this trade finance pilot.
The other concerns the “digital issuance of wealth management products,” and would involve financial institutions HSBC and UOB.