UBS announces pilot of tokenized money market fund

UBS announces pilot of tokenized money market fund

UBS Asset Management, the asset management division of Switzerland's largest financial holding, announced the launch of its inaugural live pilot of a tokenized Variable Capital Company fund.

The fund is a legal entity for investment funds in Singapore, introduced in January 2020 to enhance the city's position as a hub for fund management activities.

Tokenize, the firm's in-house tokenization service, will initiate a controlled pilot of a tokenized money market fund, which comes in the form of a smart contract on Ethereum, and enables the firm to facilitate fund subscriptions and redemptions.

s expertise in tokenizing bonds and structured products, said Thomas Kaegi, head of UBS Asset Management, Singapore and Southeast Asia.

In its initiative, UBS said it will collaborate with both traditional financial institutions and fintech providers. The aim is to gain insights into how to enhance market liquidity and provide better market access for their clients.

The pilot is part of Project Guardian, a larger MAS-led VCC umbrella initiative that aims to tokenize various real-world assets. The Monetary Authority of Singapore is the city's central bank and financial watchdog, and Variable Captial Companies are an alternative corporate structure to limited partnerships, trust structures, and others.

Tokenization of tangible assets is the process of converting ownership or rights to physical assets into digital tokens on a blockchain or distributed ledger.

Blockchain technology transforms tangible assets such as real estate, artwork, stocks, and commodities into digital tokens that can be easily purchased, sold, and traded on a blockchain network.

The financial regulatory agency's previous efforts in the blockchain field included the search for potential decentralized finance applications in wholesale funding markets.

In November 2022, JP Morgan Onyx, DBS, and SBI Digital Asset conducted trials for foreign exchange transactions and government bond trades using Modified Public lending protocol Aave and the decentralized exchange Uniswap on the Polygon blockchain.

The UBS Tokenize platform was also used in Hong Kong for the recentissuance of digital structured notes by Bank of China Investment, amounting to CNH 200 million. The tokenized notes were created and issued on the Ethereum blockchain.

In a similar move toward the end of the previous year, UBS issued the world's first digital bond - a 375 million Swiss franc-denominated three-year bond with a 2.33% coupon, which has the same instrument structure, legal status, and rating as a traditional UBS senior unsecured note.

UBS's CEO, Ralph Hamers, has 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.