UBS Asset Management Takes a Leap in Tokenization with Ethereum Pilot

UBS Asset Management has entered the world of tokenized funds with the launch of its first live pilot for a tokenized Variable Capital Company (VCC) fund. This groundbreaking move is part of a broader initiative known as Project Guardian, led by the Monetary Authority of Singapore (MAS), and is designed to bring various real-world assets onto the blockchain.

The tokenization pilot is a significant milestone, according to Thomas Kaegi, Head of UBS Asset Management, Singapore & Southeast Asia. Kaegi emphasized that the goal of this initiative is to collaborate with traditional financial institutions and fintech providers to enhance market liquidity and improve market access for clients.

Utilizing its proprietary tokenization service, UBS Tokenize, the bank initiated a controlled pilot of a tokenized money market fund. This fund is represented as a smart contract on the Ethereum public blockchain, allowing for various activities such as fund subscriptions and redemptions.

This move aligns with UBS Asset Management’s global distributed ledger technology strategy, which centers on harnessing the capabilities of both public and private blockchain networks to streamline fund issuance and distribution.

UBS has been actively exploring blockchain technology and digital assets. In 2022, the bank introduced the world’s first publicly traded digital bond and issued a $50 million tokenized fixed-rate note. More recently, in June 2023, it originated CNH 200 million in fully digital structured notes for a third-party issuer.

The successful launch of the tokenized money market fund pilot marks the beginning of further live pilot use cases under Project Guardian. UBS Asset Management plans to expand its collaboration with a broader range of partners and explore various investment strategies.

Tokenization, the process of converting real-world assets into digital tokens on a blockchain, is gaining traction as it offers improved tracking, trading, programmability, and management of assets. UBS’s entry into this space signifies the growing importance of blockchain and tokenization in the financial industry.

As UBS continues to explore the possibilities of blockchain and digital assets, it remains at the forefront of innovation in the financial sector.