UBS pilots tokenised money market transfers on public blockchains

By Matthew Griffin Connected Society 9th September 2023

WHY THIS MATTERS IN BRIEF

In the future all assets could be tokenised representing up to $64 Trillion of new business opportunity.

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UBS Asset Management issued a pilot tokenized money market fund on the Ethereum public blockchain. It is one of the controlled pilots that are part of the Monetary Authority of Singapore (MAS) Project Guardian.

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“This is a key milestone in understanding the tokenization of funds, building on UBS’s expertise in tokenizing bonds and structured products,” Thomas Kaegi, Head of UBS Asset Management, Singapore & Southeast Asia. “Through this exploratory initiative, we will work with traditional financial institutions and fintech providers to help understand how to improve market liquidity and market access for clients.”

A key advantage of tokenizing funds is greater liquidity through an expanded reach. That’s where public blockchain can help. If it’s possible to reduce fund distribution costs through technology, this translates to smaller denominations for investments – so-called fractionalization – which expands the pool of investors. High net worth individuals might invest in funds previously only accessible to institutions.

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During the first pilot transactions, UBS Asset Management executed fund subscriptions and redemption of the tokenized fund represented as a blockchain smart contract. It plans to work with more partners and explore other investment strategies in further live pilots. UBS used its own UBS Tokenize platform.

The fund is structured as a Variable Capital Company, a new Singapore corporate structure targeted at the asset management industry. PwC recently compared the VCC structure to others used by major asset management centers around the world.

The UBS Tokenize platform was used in Hong Kong for the recent Bank of China Investment (BOCI) digital structured notes for CNH 200 million ($28m). It also issued the tokenized notes on Ethereum. Late last year, UBS Wealth Management issued $50 million in blockchain debt securities. Investors included high net worth individuals in Hong Kong and Singapore via a private placement. In that case, it used a permissioned version of Ethereum.

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Closer to home, last year UBS issued its own CHF 375 million ($411m) bond via the SIX Digital Exchange (SDX), a bond listed on both SDX and SIX, even though the bond is natively digital. This was possible because SDX linked its central security depositary (CSD) to the main SIX SIS CSD. The UBS bond is also possibly the largest digital bond issued so far.

Talking about blockchain earlier this year, UBS Chair Colm Kelleher recently said, “The technology’s unstoppable. Blockchain technology will reduce huge operational friction, reduce costs and, harnessed properly, will be a very good value additive to the chain.”

Matthew Griffin / About Author

Described by NASA as a "Walking Encyclopaedia of the Future" and one of the world’s most in demand keynote speakers Matthew Griffin, Founder and Futurist in Chief of the 311 Institute, a global Futures and Deep Futures advisory firm, is a multi-award winning Futurist and strategic foresight expert, author, lecturer, mentor, podcast and YouTube host.

With a distinguished career running global business units at Atos, EMC, and IBM today Matthew helps leaders and titans of industry from all over the world explore the impact of the inter sections of technology, culture, and leadership, then helps them create high performance organisations that can continuously disrupt, outpace, and outthink their competition.

15 times author of the hit series the Codex of the Future series Matthew's ability to identify, track, and explain the impacts of hundreds of emerging technologies and trends on global business, culture, and society has earned him a powerful reputation and a roster of clients that include royal households, world leaders across the G7, G20, and G77, and many of the world's most recognised and exceptional organisations including ABB, Accenture, ABN Amro, Adidas, AON, ARM, BCG, Centrica, Citi Group, Coca Cola, Deloitte, Dentons, Disney, Dow, EY, Google, KPMG, Lego, Microsoft, Legal & General, LinkedIn, Nokia, Paramount, PepsiCo, PWC, Qualcomm, RWE, Samsung, T-Mobile, UBS, Visa, WIRED, WPP and hundreds of others.

Matthew is regularly featured in the global media including the AP, BBC, Bloomberg, CNBC, Discovery, Forbes, Khaleej Times, Telegraph, TIME, ViacomCBS, WIRED, and the WSJ, and his mission is to help organisations create a fair and sustainable future whose benefits are shared by everyone irrespective of their ability, background, or circumstances.