Multinational banking firm JP Morgan has successfully executed its first ever cross-border transaction using decentralized finance (DeFi) on a public blockchain.

The trade was facilitated by the Monetary Authority of Singapore’s (MAS) Project Guardian on Nov. 2 — which was established as part of a pilot program to “explore potential decentralized finance (DeFi) applications in wholesale funding markets.”

In other words, the pilot was another step into examining how traditional financial institutions can use tokenized assets and DeFi protocols to conduct financial transactions, among other use cases. 

Singapore’s largest bank — DBS Bank, Tokyo-based banking firm SBI Digital Asset Holdings and business leadership platform Oliver Wyman Forum also took part in the pilot program. 

The trade was executed on Ethereum layer-2 network Polygon, using a modified version of AAVE protocol's smart contract code.

MAS said that a “live cross-currency transaction” was conducted, involving tokenized Singaporean Dollar and Japanese Yen deposits, along with a simulated exercise of buying and selling of tokenized government bonds.

Tyrone Lobban, Head of Blockchain Launch and Onyx Digital Assets at JP Morgan's Onyx business unit shared the news on Twitter on Nov. 2, noting the tokenized SGD deposits were the first issuance of tokenized deposits by a bank. 

MAS Chief FinTech Officer Sopnendu Mohanty said it was a “big step” towards more efficient financial networks, and the latest pilot has helped develop the country’s digital asset strategy, commenting: 

“The live pilots led by industry participants demonstrate that with the appropriate guardrails in place, digital assets and decentralized finance have the potential to transform capital markets."

Umar Farooq, the CEO of “Onyx by JP Morgan” — a business unit within the asset management firm that focuses on blockchain technology — told Bloomberg on Nov. 2 that JP Morgan’s on-chain transaction “was the first time that a major bank, possibly any bank, had tokenized deposits on a public blockchain.”

DeFi lending protocol AAVE also commented on the new pilot, adding that the DeFi trade is a “huge milestone” for the industry as it “represents a massive step towards bridging traditional financial assets into DeFi.”

Project Guardian was first officially launched in May. 2022, which came about a month after a partnership was made between JP Morgan and DBS to build a new blockchain interbank platform to complement the work of central bank digital currencies (CBDCs).

Related: Security tokenization may be the next big use case for blockchain tech

The milestone comes as many of the largest financial players have predicted big things to come for blockchain-based tokenization of real world assets.

Boston Consulting Group estimated the total size of tokenized illiquid assets will reach $16.1 trillion by 2030 in a Sept. 2022 report.

While Cynthia Wu, COO of digital asset service platform Matrixport recently told Cointelegraph that “almost everything could be tokenized in 5-10 years” and that nonfungible tokens (NFTs) could be the instrument used to represent off-chain assets like real estate deeds, equities and bonds.