JPMorgan completes first DeFi transaction on Polygon
As part of the Monetary Authority of Singapore's (MAS) Project Guardian, JPMorgan performed the first live trade on a public blockchain.
The transaction was executed by the financial giant using DeFi, Tokenized Deposits, and Verifiable Credentials.
Project Guardian is a collaboration between MAS and financial companies like JP Morgan, Marketnode, and DBS Bank Ltd. It focuses on asset tokenization and DeFi use cases.
DBS Bank, JPMorgan, and SBI Digital Asset Holdings participated in the pilot program by trading foreign exchange and government bonds against liquidity pools holding tokenized Singapore, Japanese government bonds, Japanese Yen, and Singapore dollars.
A cross-currency transaction comprising tokenized Japanese Yen and Singapore Dollar deposits was completed by the parties. They also conducted a simulated trade of tokenized government bonds.
JPMorgan completes first DeFi transaction
Ty Lobban, JPMorgan's Head of Blockchain Launch & Onyx Digital Assets, revealed how the transaction was executed in a Nov. 2 Twitter thread. According to Lobban, the bank conducted the transaction on the Ethereum (ETH) layer2 network Polygon (MATIC) due to its low transaction fees and using the permission pool concept of the Aave (AAVE) Protocol.
He went on to say that JPMorgan issued a tokenized Singapore Dollar (TSD) deposit in exchange for Japanese Yen. TSD is a native deposit token with a stable on-chain value that does not suffer from the scalability concerns that plague stablecoin.
To have compliant access to Aave, the bank employed W3C Verifiable Credentials (VC) and created on-chain verification of VCs.
On-chain verification, according to Loban, "brings composability to identity," which may be used across several DeFi protocols. He went on to say:
"(JPMorgan) cannot enable money laundering and must do KYC." Using VCs and allowlists was crucial in enabling us to use DeFi pools with certainty on these points."
Finally, the bank built an institutional wallet to prevent traders from accessing company funds. Simultaneously, trades can be conducted using only approved DeFi protocols, and all trade institutions have VCs.
