October 2, 2023 at 13:34 GMTModified date: October 2, 2023 at 13:34 GMT
October 2, 2023 at 13:34 GMT

USB pioneers tokenised VCC fund in Singapore

UBS Asset Management has announced the launch of the first blockchain-native tokenised VCC fund pilot in Singapore

USB pioneers tokenised VCC fund in Singapore

UBS Asset Management has taken the lead in launching the first blockchain-native tokenised money market fund in Singapore. Its first live pilot was released on the Ethereum blockchain today, 2 October, as per the official announcement.

The fund is structured as a Variable Capital Company (VCC) which is a new legal entity form for all types of investment funds in Singapore. It is a part of Project Guardian which is a collaborative industry initiative led by the Monetary Authority of Singapore (MAS). The project seeks to test the feasibility of applications in asset tokenisation and DeFi while managing risks to financial stability and integrity.

Under this wider VCC umbrella, various “real world assets” are designed to be brought on-chain. The recent launch is the first among the many ‘live’ pilots that UBS plans to launch in the time to come.

The controlled pilot of this tokenised money market fund utilises the firm’s in-house tokenisation service ‘UBS Tokenize’. It is represented as a smart contract on the Ethereum public blockchain and enables UBS Asset Management to carry out various activities including fund subscriptions and redemptions.

Talking about the same, Head UBS Asset Management, Singapore & Southeast Asia, Thomas Kaegi, said: “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 latest fund is also a part of UBS Asset Management’s global distributed ledger technology strategy which focuses on leveraging public and private blockchains networks for enhanced fund issuance and distribution.

Committed to testing and utilising blockchain technology, UBS launched the world’s first publicly traded digital bond in November 2022. It enabled investors, regardless of whether they have the blockchain infrastructure, to invest in a digital bond. This efficiently removed the hurdle on the way to adopt new disruptive technology. As a result, issuing bonds is now faster, more efficient and simpler.

A month later in the same year, it went ahead to issue a USD 50 million tokenised fixed rate note, and in June 2023 originated CNH 200 million of fully digital structured notes for a third party issuer in Hong Kong. This was the first Chinese financial institution to issue a tokenised security in the country. The transaction also marked the first product of its kind in Asia Pacific constituted under Hong Kong and Swiss law and tokenised on the main Ethereum block.

Owing to the successful launch of its recent pilot transactions, UBS Asset Management has also announced that it will now be looking to execute further live pilot use cases under Project Guardian. It seeks to work with a broader set of partners and explore various investment strategies, said the firm.

Tokenisation helps in bringing off-chain or real-world assets on-chain, facilitating the tracking, trading, programmability and management of these assets. As one of the largest truly global wealth managers and the leading universal bank in Switzerland, USB’s dive into this has strengthened its commitment to blockchain technology.

The firm also provides large-scale and diversified asset management solutions and focused investment banking capabilities.