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UBS asset management tests fund tokenization on Ethereum blockchain

by Abigail Bautista

The tokenization trend continues to gain momentum in the world of finance, and now it has made its way to one of the largest fund houses in the world. UBS Asset Management has announced the launch of its first live pilot testing for a tokenized Variable Capital Company (VCC) fund.

The pilot project will utilize UBS’s in-house tokenization service, called USB Tokenize, to test various fund activities on the Ethereum public blockchain. This includes subscriptions and redemptions, which will be conducted using smart contract technology. The use of blockchain technology ensures that these transactions are secure, transparent, and immutable, allowing anyone to view and confirm the records.

Thomas Kaegi, Head of UBS Asset Management in Singapore and Southeast Asia, expressed the significance of this pilot project, stating, “This is a key milestone in understanding the tokenization of funds, building on UBS’s expertise in tokenizing bonds and structured products. 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.”

The tokenized money fund is part of Project Guardian, led by the Monetary Authority of Singapore (MAS), which aims to bring various ‘real world assets’ onto the blockchain. It is worth noting that the VCC structure of the fund is a new form of legal entity designed for all types of investment funds in Singapore.

This new pilot project is aligned with UBS Asset Management’s broader strategy of leveraging distributed ledger technology for enhanced fund issuance and distribution. It follows their previous initiatives, such as the launch of the first publicly traded digital bond and the issuance of a $50 million tokenized fixed-rate note.

UBS’s expansion into tokenization services also includes their collaboration with Bank of China International Holdings (BOCI) for the issuance of fully digital structured notes. With the successful pilot transactions of the VCC fund, UBS plans to execute further live pilot use cases under Project Guardian and work with a wider set of partners to explore various investment strategies.

The potential of tokenization in financial markets is significant. By digitizing traditional assets and utilizing blockchain technology, financial institutions can improve efficiency, transparency, and accessibility. As UBS explores these possibilities, it is clear that tokenization is not just a passing trend but a transformative force in the finance industry.

It is important to note that the views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. As with any investment, there are risks involved, and it is essential for investors to do their own research and seek professional advice before making any financial decisions. This article is strictly for informational purposes and should not be considered as financial advice.

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