The trade took place on 2 November 2022 and was facilitated by Project Guardian of the Monetary Authority of Singapore (MAS). According to the MAS, Project Guardian is a collaborative initiative with the financial industry that seeks to test the feasibility of applications in asset tokenisation and DeFi while managing risks to financial stability and integrity.
The pilot programme also saw the involvement of entities such as DBS Bank, Tokyo-based banking firm SBI Digital Asset Holdings, and business leadership platform Oliver Wyman Forum. The trade was executed on Ethereum layer-2 network Polygon using an altered variant of the Aave protocol’s smart contract code.
DeFi lending protocol Aave representatives cited by cointelegraph.com emphasised that the DeFi trade is an important milestone for the industry as it represents a big step towards bridging traditional financial assets into DeFi. In essence, the pilot explored and shed some light on how traditional financial institutions can use tokenised assets and DeFi protocols to perform financial transactions.
According to the same source, some of the largest financial players have high expectations from blockchain-based tokenisation of real-world assets. A report from BCG and digital exchange for private markets ADDX offers some background for this statement. According to the report, the total size of tokenised illiquid assets will reach USD 16.1 trillion by 2030.
Some of Project Guardian’s main objectives include establishing industry pilots with traditional financial institutions and fintechs in order to understand opportunities and risk areas, as well as assessing the longer-term transformational impact and aim for safe development of the ecosystem using industry experiments and research as a reference. The project also aims to define an acceptable governance model or accountability.
Other focus areas include establishing a trusted environment for the execution of DeFi protocols through a common trust layer of independent trust anchors, as well as examining the representation of securities in the form of digital bearer assets and the use of tokenised deposits issued by deposit-taking institutions on public blockchains.
In October 2022, JP Morgan has partnered with Visa to streamline global payments using their private blockchain networks, Liink and B2B Connect. Liink, formerly called Interbank Information Network, was launched by JP Morgan in 2017 with the aim of making cross-border transfers more efficient. Currently, the success of global payments relies on correspondent banks coordinating across time zones and currencies.
Visa’s cross-border payments product for financial institutions and corporate clients, B2B Connect, has adopted Confirm, Liink’s account-information validation product, to validate account information. JP Morgan announced that Deutsche Bank would join as a founding member of the Confirm product to guide its strategic expansion. The development comes shortly after Canada-based financial institution TD Securities has joined Visa’s B2B Connect to improve cross-border payments.
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