How Aave Helped JP Morgan Complete Its First DeFi Transaction

Legacy financial institutions now embrace cryptocurrency and decentralized finance (DeFi) and Aave, an Ethereum-based protocol is proof. The protocol’s team is now available. announcedJP Morgan Chase, a banking giant, completed the first DeFi transaction.

This is an important milestone for the industry, which continues to be in high demand despite the negative trend in the cryptocurrency market. The total value of the DeFi sector as measured in total value locked (TVL) was $5 billion two years ago.

This metric will rise by more than 20 times in a very short time, to an all-time high around $170 billion by 2020, according data from DeFi Llama. Today’s milestone marks a new era for the nascent sector and digital assets.

TVL for DeFi sector at its highest. Source: DeFi Llama

Aave supports major JP Morgan transactions

According to the official announcement, JP Morgan leveraged a “modified” version of the Aave protocol. Due to its higher scalability, the project used Ethereum’s second-layer solution, Polygon. This is what the team behind this protocol stated:

Utilizing the Aave protocol to involve supply and borrowing of tokenized forex transactions using SGD tokenized accounts (1st issuing of tokenized deposits in a bank!) J.P. Morgan, and JPY tokenized assets from SBI Digital Asset Holdings.

The transactions are part of the Monetary Authority of Singapore (MAS) led “Project Guardian.” The initiative explores ways to bridge legacy financial institutions with decentralized finances “across a broader range of use cases.”

JP Morgan and other large banks are also participating in this initiative. This transaction is the first of a series to test the use of digital assets and DeFi to enhance the efficiency and interoperability of legacy financial markets.

AAVE’s price is suffering losses on the daily chart. Source: AAVEUSDT Tradingview

Project Guardian was announced in May 2022, its objective is to “identify” the key areas where traditional financial institutions and DeFi protocols can collaborate. So far, the initiative has identified pilot programs to “unlock economic value,” the study of regulatory and risk management, developing technology standards, and others as areas of interest. Chief FinTech Officer at MAS, Sopnendu Mohanty, said:

Live pilots conducted by representatives from the industry demonstrate how digital assets can transform capital markets if there are the right safeguards. This milestone is important in the development of more global, integrated financial networks. Project Guardian has deepened MAS’ understanding of the digital asset ecosystem (…).

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