On 2 October 2023, UBS Asset Management announced the launch of its first live pilot of a tokenised variable capital company (VCC) fund. The initiative is part of the Monetary Authority of Singapore’s (MAS) Project Guardian to bring real-world assets on the blockchain.
To carry out this controlled pilot, UBS will leverage its in-house tokenisation service, UBS Tokenise. Using a smart contract on the Ethereum public blockchain, the pilot will allow UBS Asset Management to perform various operations, including fund subscriptions and redemptions, seamlessly.
The pilot aligns perfectly with UBS Asset Management’s global distributed ledger technology strategy to leverage blockchain technology, both public and private, for efficient fund issuance and distribution. This initiative contributes to the broader expansion of UBS’s tokenisation services, marking a pivotal moment in their digital asset journey.
Thomas Kaegi, Head of UBS Asset Management, Singapore and Southeast Asia, expressed that the recent development is a significant step in understanding the tokenisation of funds. He added, “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.”
UBS has been at the forefront of developing innovative digital assets. In November 2022, it launched the world’s first publicly traded 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.
In June 2023, the UBS Tokenise platform was utilised in Hong Kong to issue digital structured notes by Bank of China Investment (BOCI), amounting to CNH 200 million ($27.3 million). These tokenised notes were created and issued on the Ethereum blockchain.
Following the successful rollout of UBS’s first pilot transactions, the asset management firm plans to continue with more live pilot use cases under Project Guardian, working with a broader range of partners and exploring different investment strategies. These collaborations would enhance market liquidity for the clients by gaining valuable insights.
Although UBS tokenised service and VCC fund are relatively new, as these innovative solutions continue to evolve and gain traction, they can reshape the digital asset landscape and the financial system in the upcoming years.