UBS Completes Pilot Project for Blockchain Solution to Streamline Tokenised Fund Services

Asset management firm UBS has announced that it has completed the pilot trial of a blockchain solution, that will help financial institutes streamline their service offerings around tokenised assets. The Switzerland-based firm currently has a market cap of over $104.3 billion (roughly Rs. 8.8 trillion). Diving deeper into blockchain use cases, UBS teamed up with Chainlink and the Swift network in order to conduct the pilot trials.

The solution tested by Chainlink, Swift, and UBS is the "Digital Subscription and Redemption System" for tokenised funds. Chainlink is a decentralised blockchain network that connects off-chain data with smart contracts, while the Swift Network is a secure messaging platform used by financial institutions.

Expanding on the development, Swift stated that the solution was created as part of Project Guardian, under the oversight of the Monetary Authority of Singapore (MAS).

“The new pilot demonstrates how financial institutions can facilitate off-chain cash settlements for tokenised funds. This initiative would enable digital asset transactions to settle with fiat payment systems across more than 11,500 financial institutions, across over 200 countries and territories,” the statement said.

According to a report by The Paypers, Chainlink and Swift's role in the pilot was to demonstrate how blockchain can enhance the redemption and subscription processes for tokenised funds.

The UBS initiated the process of creating this solution after identifying certain inefficiencies that prevail in traditional financial operations. These setbacks include delayed settlements, a lack of real-time transparency, and manual interventions among others.

“Financial institutions can leverage blockchain technology, the Chainlink platform and the Swift network to settle subscriptions and redemptions for tokenised investment fund vehicles, thereby allowing the straight-through-processing of the payment leg without the need for the global adoption of an on-chain form of payment. This helps in the automation of the entire lifecycle of the fund redemption and subscription process,” the statement released by Swift noted.

Understanding Blockchain and Tokenised Funds

Blockchain networks save data and information in a cluster of small packets rather than keeping data stored in one server. This makes the data more protected against hacks, bringing security to the fintech sector. Additionally, information logged on blockchain networks is saved permanently and cannot be altered. Large scale financial institutions like JPMorgan, Mastercard, and Standard Chartered among others are also exploring the uses of blockchain in areas like asset tokenisation.

The process of creating digital units of a physical or virtual property that is held on blockchain networks is known as asset tokenisation. Tokenising an asset can increase the liquidity of the assets. Tokenised assets allow owners to quickly raise capital by issuing tokens on a blockchain, enabling others to purchase and trade them on various exchanges.