UBS taps Ethereum to pilot tokenized money market fund

UBS Asset Management, one of the world's largest fund houses, has launched its first "live pilot" of a tokenized money market fund on the Ethereum ETH +3.79% blockchain.

The pilot allows UBS Asset Management to test various fund activities on-chain, including subscriptions and redemptions, the firm said Monday. UBS has utilized its in-house tokenization service, UBS Tokenize, to launch the pilot of the fund.

"This is a key milestone in understanding the tokenization of funds, building on UBS's expertise in tokenizing bonds and structured products," Thomas Kaegi, head of UBS Asset Management in Singapore and Southeast Asia, said in a statement. "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 testing and utilizing blockchain technology. In November 2022, UBS launched the world’s first digital bond that is publicly traded and settled on both blockchain-based and traditional exchanges. In December 2022, the firm issued a $50 million tokenized fixed rate note, and in June 2023, it originated 200 million yuan of fully digital structured notes for a third-party issuer.

Part of Project Guardian

The latest tokenized money market fund pilot is part of Project Guardian — a collaborative industry initiative led by the Monetary Authority of Singapore (MAS) — UBS said. The fund is structured as a variable capital company (VCC) — a new legal entity form for all types of investment funds in Singapore.

Following the successful launch of the first pilot transactions, UBS Asset Management will be looking to execute further live-pilot use cases under Project Guardian — working with a broader set of partners and exploring various investment strategies — the firm said.

Tokenization, which helps bring off-chain or real-world assets on-chain, has been gaining popularity. Tokenization allows tracking, trading, programmability and management of these assets, The Block Research explained in its recent report. It has "the potential to significantly reshape the digital asset landscape, as well as the global financial system at large," the report added.