The tokenization trend continues to gain momentum.
UBS Asset Management, the asset management division of Switzerland’s largest financial holding company, today announced the launch of its first live pilot of a tokenized Variable Capital Company (VCC) fund.
The fund represents a legal entity for investment funds in Singapore, launched in January 2020 to strengthen the city-state’s position as a hub for fund management activities.
The company will use its internal tokenization service called UBS Tokenize to launch a controlled pilot of a tokenized money market fund, in the form of a smart contract on Ethereum, allowing the company to facilitate fund subscriptions and redemptions.
“This is an important milestone in understanding the tokenization of funds and builds on UBS’s expertise in the tokenization of bonds and structured products,” said Thomas Kaegi, head of UBS Asset Management, Singapore and Southeast Asia.
He said that UBS will work with both traditional financial institutions and fintech providers as part of this initiative. The aim is to gain insights into how to increase market liquidity and provide their customers with better market access.
The pilot is part of Project Guardian, the broader MAS-led VCC umbrella initiative that aims to tokenize various real-world assets. The Monetary Authority of Singapore (MAS) is the city-state’s financial regulator and central bank. Variable capital companies (VCC) are an alternative business structure to limited partnerships, trust structures and others.
Real-world asset tokenization is the process of converting ownership or rights to physical assets into digital tokens on a blockchain or distributed ledger.
This approach uses blockchain technology to convert tangible assets such as real estate, artwork, stocks or goods into digital tokens that can be conveniently bought, sold and traded on a blockchain network.
UBS joins the tokenization wave
The financial regulator’s previous efforts in the blockchain space have included exploring potential decentralized finance (DeFi) applications in wholesale financing markets.
To this end, in November 2022, JP Morgan Onyx, DBS and SBI Digital Asset conducted trials for foreign exchange transactions and treasury bond trading using the modified public lending protocol Aave and the decentralized exchange (DEX) Uniswap on the Polygon blockchain.
The UBS Tokenize platform was also used in Hong Kong for Bank of China Investment’s (BOCI) recent CNH200 million ($27.3 million) issuance of digital structured notes. These tokenized banknotes were created and issued on the Ethereum blockchain.
In a similar development, UBS launched the world’s first publicly traded digital bond at the end of last year – a 375 million Swiss franc three-year bond with a coupon of 2.33%, which has the same instrument structure, legal status and meaning is rated as a traditional UBS senior unsecured note.
Despite his interest in blockchain technologies and the opportunity for his clients to invest in cryptocurrencies, UBS CEO Ralph Hamers has in the past ruled out actively offering trading, custody or lending services related to “alternative” crypto assets, and also described cryptocurrencies as “untested assets”. Category.”
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