UBS Asset Management launches tokenized money market fund

UBS Asset Management launches tokenized money market fund

Today, UBS Asset Management, 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 investing funds in Singapore that was introduced in January 2020 to enhance the city-state's position as a hub for fund management activities.

The firm will use its in-house tokenization service, UBS Tokenize, to begin a controlled pilot of a tokenized money market fund, which consists of a smart contract on Ethereum and enables the firm to carry out fund subscriptions and redemptions.

Mr. Kaegi, head of UBS Asset Management, Singapore and Southeast Asia, said he had expertise in tokenizing bonds and structured products.

UBS will collaborate with both traditional financial institutions and fintech providers, he said. 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 broader VCC umbrella initiative led by MAS, that aims to tokenize various real-world assets. The monetary authority of Singapore is the city's central bank and financial watchdog, with variable capital companies being an alternative corporate structure to limited partnerships, trust structures, and others.

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

Blockchain technology has been utilized to transform tangible assets like real estate, artwork, stocks, or commodities into digital tokens that can be easily purchased, sold, and traded on a blockchain network.

The financial regulator's previous efforts in the blockchain industry included the emergence of 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 the modified public lending protocol Aave and the decentralized exchange Uniswap on the Polygon blockchain.

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

UBS's first publicly traded digital bond, A 375 million Swiss franc-denominated three-year bond with a 2.33% coupon, has the same instrument structure, legal status, and rating as a traditional UBS senior unsecured note.

Despite its interest in blockchain technology and offering its clients the opportunity 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, while also calling cryptocurrencies an 'untested asset category'.