UBS Tokenization Trial On Ethereum Has Been Launched

(CTN News) – UBS Asset Management, the asset management division of Switzerland’s largest financial holding, announced today the launch of its first tokenized Variable Capital Company (VCC) fund.

In January 2020, Singapore introduced the fund as a legal entity for investment funds in order to enhance the city-state’s position as a fund management hub.

Through its specialized tokenization service, UBS Tokenize, the firm will pilot a tokenized money market fund that consists of a smart contract on Ethereum that facilitates subscriptions and redemptions.

According to Thomas Kaegi, Head of UBS Asset Management,

Singapore and Southeast Asia, “this can be seen as a milestone in understanding the tokenization of funds, based on UBS’ expertise in tokenizing bonds and structured products,” he said.

According to him, as part of this initiative, UBS will collaborate with both traditional financial institutions as well as fintech providers. In order to gain insight into how to improve market liquidity, as well as to provide better access to the market for their clients, this study has been undertaken with the intention of gaining insight into how to improve market liquidity.

There are a number of assets in the real world that can be tokenized as part of Project Guardian, a MAS-led initiative that aims to tokenize a number of these assets.

The Monetary Authority of Singapore (MAS) is the financial watchdog and central bank of the city-state. Variable Capital Companies (VCCs) are an alternative corporate structure to limited partnerships, trust structures, and other kinds of corporations that are commonly used in Singapore.

In the tokenization of real-world assets, the ownership or rights to physical assets are converted into digital tokens on a blockchain or distributed ledger, enabling them to be traded on exchanges.

Using blockchain technology, this approach is used to convert tangible assets such as real estate, artwork, stocks, and commodities into digital tokens that can be readily purchased, sold, and traded on a blockchain network, making it convenient to buy, sell, and trade them.

A previous effort of the financial regulator within the blockchain space involved exploring potential decentralized finance (DeFi) applications in wholesale funding markets.

JP Morgan Onyx, DBS, and SBI Digital Asset conducted trials for foreign exchange transactions and government bond trades using the modified public lending protocol Aave and the decentralized exchange (DEX) Uniswap on the Polygon blockchain in November 2022.

UBS Tokenize was also used for the recent issuance of digital structured notes by Bank of China Investment (BOCI) in Hong Kong, amounting to CNH 200 million ($27.3 million). These tokenized notes were created and issued on the Ethereum blockchain.

A 375 million Swiss franc-denominated three-year bond with a coupon rate of 2.33% was launched by UBS at the end of the previous year, making it the world’s first publicly traded digital bond. Bonds issued by UBS have the same structure, legal status, and rating as traditional senior unsecured notes.

However, UBS CEO Ralph Hamers has in the past ruled out actively offering trading, custody, or lending services related to “alternative” crypto assets, despite its interest in blockchain technologies and allowing its customers to invest in cryptocurrencies. He also referred to cryptocurrencies as an “untested asset category.”

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