Originally published on: November 05, 2024
In a groundbreaking partnership led by the Monetary Authority of Singapore (MAS), Swift, UBS Asset Management, and Chainlink have successfully completed a pilot program for tokenized fund settlements.
This innovative initiative leverages Swift’s extensive global financial messaging network, connecting over 11,500 institutions, to seamlessly integrate tokenized fund processes with traditional fiat payment systems.
What sets this project apart from previous tokenization trials is its ability to facilitate transactions without relying solely on blockchain-based payment options. By utilizing existing infrastructure, the initiative aims to drive digital finance adoption without the need for a complete overhaul of current systems.
The recent pilot aligns with the vision outlined by Chainlink co-founder Sergey Nazarov at the Swift-organized Sibos conference on Oct. 23, emphasizing the potential benefits of integrating blockchain technology with Swift’s established network.
The traditional fund settlement process, particularly in redemptions and subscriptions, often faces challenges due to manual steps and delayed settlements, leading to increased operational costs and liquidity concerns. Through Swift’s infrastructure, real-time fund redemptions and subscriptions for tokenized investment funds can now be automated, creating a more efficient and transparent process.
Nazarov expressed his enthusiasm for the adoption of “off-chain payment capabilities” and their potential to enhance capital flow. The pilot program, conducted under Project Guardian, builds on previous work done by UBS and SBI Digital Markets to develop a Digital Subscription and Redemption system for tokenized funds.
To meet the growing demand for tokenized financial assets, UBS recently launched a tokenized fund on the Ethereum blockchain called the “UBS USD Money Market Investment Fund Token” (uMINT). This move underscores the increasing interest among investors in tokenized assets and demonstrates UBS’s commitment to innovation in the financial sector.
MAS’s efforts to promote asset tokenization have drawn participation from over 40 institutions, with data from more than 15 trials informing their guidance on advancing the commercialization of tokenizing assets.
At the recent MAS Layer One Summit, MAS deputy managing director Leong Sing Chiong highlighted the successes of major financial institutions involved in Project Guardian, showcasing the potential for tokenization in foreign exchange and fund settlements. While acknowledging the progress made, Sing Chiong also emphasized the need to address the limitations identified during the trials.
As the industry continues to explore the intersection of blockchain technology and traditional finance, partnerships like the one between UBS, Swift, and Chainlink are paving the way for more efficient, transparent, and accessible fund settlements.
