Swiss multinational investment bank UBS Asset Management (SWX: UBSG) has embarked on a pilot project to tokenize a Variable Capital Company (VCC) fund in Singapore. The pilot, launched today, Monday, is a part of the Project Guardian initiative run by the Monetary Authority of Singapore (MAS). The bank used its own platform, UBS Tokenize, to conduct the first transactions in this pilot, which included fund subscriptions and redemption of the tokenized fund represented as a smart contract.
The Project Guardian initiative aims to facilitate faster settlement, greater operational efficiency, and more effective cross-border distribution for capital market instruments on digital asset networks. UBS's pilot seeks to enhance fund distribution and facilitate improved secondary market trading of VCC fund shares.
Thomas Kaegi, Head of UBS Asset Management, Singapore & Southeast Asia, highlighted that UBS plans to expand its partnership network for the project and explore other investment strategies in future live pilots. Notably, UBS has shown impressive financial performance with a market cap of 78597.81M USD and a P/E ratio of 2.29, according to InvestingPro data.
Project Guardian was announced by MAS back in May 2022, with the aim of establishing "best practices and technical standards" in the financial ecosystem. It also tests the feasibility of applications in asset tokenization and decentralized finance (DeFi) while managing risks to financial stability and integrity. The Japan Financial Services Authority (FSA) joined the project in June 2023.
Several pilots have been launched under Project Guardian till date. One such pilot involved HSBC, Marketnode, and UOB who completed a technical trial on the issuance and distribution of a digitally native structured product. This pilot demonstrated that the structured product chain could offer faster issuance and settlements at lower costs.
Another noteworthy pilot was completed by DBS Bank, JPMorgan (NYSE:JPM), and SBI Digital Asset Holdings. The organizations conducted foreign exchange and government bond transactions against liquidity pools comprising tokenized Singapore Government Securities Bonds, Japanese Government Bonds, Japanese Yen (JPY), and Singapore Dollar (SGD).
Currently, a pilot is being carried out within Project Guardian on a repurchasing agreement (repo) with natively issued digital bonds. DBS Bank, SBI Digital Asset Holdings, and UBS AG are in charge of this test. UBS, a prominent player in the Capital Markets industry as per InvestingPro Tips, has been aggressively buying back shares, which is indicative of the company's confidence in its own stock.
In related news, UBS Group AG (SIX:UBSG) also announced the launch of a pilot project to tokenize money market funds. This test will take place on the UBS Tokenize platform, developed on the Ethereum blockchain. The bank believes that tokenizing these funds will increase liquidity and attract more potential clients. As part of this project, the UBS Asset Management division successfully redeemed a tokenized fund in the smart contract format and plans to involve more contractors in the future. The company's strong return over the last three months, as highlighted by InvestingPro Tips, further underscores the potential success of these innovative endeavors.
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