Older financial institutions are embracing crypto and decentralized finance (DeFi), and Ethereum-based protocol Aave is proof of that. The team behind TODAY Protocol announced That banking giant JPMorgan Chase completed its first DeFi transaction.
5/5 @J. P. Morgan Transacting on a public blockchain using Aave smart contracts is a huge milestone for DeFi, and represents a major step toward bringing traditional financial assets to DeFi, in a way that is borne by smart contract-based dApps. opportunities to be fully realized.
— Aave (@AaveAave) 2 November 2022
This represents a major milestone for the sector that continues to see high demand and adoption despite a declining trend in the crypto market. Two years ago, the total value for the DeFi sector, as measured by Total Value Lock (TVL), was less than $5 billion.
According to DeFi Lama data, this metric will grow by more than 20 times in a short period of time, reaching an all-time high of around $170 billion by 2021. Today’s milestone marks the nascent sector and a new era for digital assets.
Aave backs major JPMorgan transaction
according to official announcement, JPMorgan took advantage of a “modified” version of the AW protocol. Because of its high scalability, the project used Ethereum’s second-layer solution, Polygon. The team behind the protocol said:
The AAV protocol was used by involving the supply and lending of tokenized foreign exchange transactions using SGD token deposits issued by JPMorgan (the first issue of token deposits by the bank!) and JPY tokenized assets issued by SBI Digital Asset Holdings.
The transactions are part of “Project Guardian” led by the Monetary Authority of Singapore (MAS). The initiative explores ways to bridge legacy financial institutions “across a wide range of use cases” with decentralized finance.
World! JP Morgan has executed its first *live* trade on a public blockchain using DeFi, token deposits and verifiable credentials. @MAS_sg Project Guardianhttps://t.co/XI212SG4zg Many worlds first time here, and since it’s public here’s a parody of what we did:
— Ty Loban (@TyLobban) 2 November 2022
Apart from JP Morgan, other leading banking institutions are participating in the initiative, including DBS Bank, SBI Digital Asset Holding and Oliver Wyman Forum. These transactions are the first in a series of pilot tests to explore the potential of DeFi and digital assets to improve the interoperability and efficiency of older financial markets.
Project Guardian, announced in May 2022, aims to “identify” key areas where traditional financial institutions and the DeFi protocol can collaborate. So far, the initiative has identified pilot programs to “unlock the economic value”, regulatory and risk management studies, developing technology standards, and others as areas of interest. Sopanendu Mohanty, Chief Fintech Officer, MAS, said:
Live pilots led by industry participants demonstrate that with appropriate handrails, digital assets and decentralized finance have the potential to transform capital markets. This is a major step towards enabling a more efficient and integrated global financial network. Project Guardian deepens MAS’s understanding of the digital asset ecosystem (…).