UBS Asset Management has announced the launch of its first live pilot of a tokenised Variable Capital Company (VCC) fund in Singapore.
The initiative is part of Project Guardian, an initiative led by the Monetary Authority of Singapore (MAS) that explores the tokenisation of various real-world assets. Thomas Kaegi, Head of UBS Asset Management in Singapore and Southeast Asia, emphasised the importance of this move, stating, “This is a key milestone in understanding the tokenisation of funds, building on UBS’s expertise in tokenising bonds and structured products.”
The pilot utilised UBS’s in-house tokenisation service, UBS Tokenise, and was executed on the Ethereum public blockchain. This allowed UBS Asset Management to perform activities such as fund subscriptions and redemptions through a smart contract. The tokenisation of funds offers the advantage of increased liquidity and expanded access to a wider pool of investors by reducing fund distribution costs.
Kaegi also highlighted the exploratory nature of the initiative, which aims to collaborate with traditional financial institutions and fintech providers to enhance market liquidity and access for clients.
UBS has been actively involved in blockchain and tokenisation ventures, demonstrating its commitment to exploring the potential of distributed ledger technology. In the past year, UBS Tokenise platform was used in Hong Kong for the Bank of China Investment’s digital structured notes, and UBS Wealth Management issued $50 million in blockchain debt securities, catering to high-net-worth individuals in Hong Kong and Singapore. Additionally, UBS issued a CHF 375 million ($411 million) bond via the SIX Digital Exchange (SDX), making it one of the largest digital bonds issued.
The tokenisation trend is not unique to UBS, as other major institutions such as Franklin Templeton, KKR, and Hamilton Lane have also ventured into tokenised funds. This aligns with a broader industry movement towards leveraging blockchain technology to encode ownership of digital or physical assets, enhancing efficiency and transparency in financial markets.
MAS’s Project Guardian, under which UBS conducted its pilot, aims to explore the tokenisation of various real-world assets. The MAS has been gradually warming up to blockchain technologies, as evidenced by its partnerships and initiatives in the space. The commitment to progress and Singapore’s attractiveness as an investment destination, with a substantial influx of foreign investments, may contribute to the rapid adoption of tokenisation in the city-state.
Tokenisation, while showing great potential, is still expected to take some years to become mainstream. Issues related to asset possession, ownership, and the need for clear rules on asset transfers are factors that experts believe need further clarification. Despite these challenges, the potential efficiency gains and transparency offered by tokenisation make it an area of interest for various financial institutions and industry players.
UBS’s live pilot of a tokenised VCC fund in Singapore adds another notable chapter to the evolving landscape of blockchain and tokenisation in the financial industry. As the industry continues to explore and implement innovative solutions, the impact of blockchain and tokenisation on traditional financial practices is likely to grow.