UBS Asset Management and Chainlink, which provides infrastructure for the tokenized asset economy across blockchains, have completed a pilot for settling tokenized fund subscriptions and redemptions using the Swift payments network, which enables  digital asset transactions to settle with fiat currency.

Enabling tokenized money market funds to settle in fiat currency is important as consultancy McKinsey said in a report that they are expected to be the fastest-growing digital asset class and reach $400bn by 2030^.

The pilot was part of the Monetary Authority of Singapore’s Project Guardian, which aims to enhance liquidity and efficiency of financial markets through asset tokenization, and showed how financial institutions can use existing Swift infrastructure to facilitate off-chain cash settlements for tokenized funds across more than 11,500 financial institutions, and over 200 countries. This removes the need for an on-chain form of payment, such as a stablecoin or central bank digital currency.

Donovan Choy and Macauley Peterson said in a report from Blockworks Research: “As the financial industry increasingly explores digital assets, these kinds of interoperable solutions pave the way for broader adoption and operational efficiency across global markets.”

Swift, UBS Asset Management and Chainlink said in a statement on 5 November that the pilot allows straight-through-processing of the payment leg, which will help automate the entire lifecycle of the fund redemption and subscription process.

Jonathan Ehrenfeld, head of strategy at Swift, said in a statement: “For digital assets to be adopted globally, they must seamlessly integrate with both existing payment systems and digital currencies.”

Watch the full presentation and panel talk featuring:

– Sergey Nazarov, Co-Founder of Chainlink
– Avanee Gokhale, Global Head of Trade Strategy at Swift
– Winston Quek, CEO at SBI Digital Markets
– Andrew Wong, Executive Director at UBS Asset Managementhttps://t.co/BgxBpu1alw

— Chainlink (@chainlink) November 5, 2024

Growth in tokenized funds

In addition to being involved in the pilot, UBS Asset Management said in a statement on 1 November 2024 that it was  launching the UBS USD money market investment fund token, (uMINT), built on Ethereum distributed ledger technology.

The Swiss bank said the fund launch is part of the broader expansion of its tokenization services through UBS Tokenize. In June 2023 UBS originated CNH 200m of fully digital structured notes for a third-party issuer, and in November that year the bank completed the world’s first cross-border repo with a natively-issued digital bond fully executed and settled on a public blockchain.

Thomas Kaegi, co-head of UBS Asset Management APAC, said in a statement: “We have seen growing investor appetite for tokenized financial assets across asset classes.”

The growth in tokenized funds is demonstrated by Securitize, the real-world asset tokenization platform, surpassing $1bn in tokenized real-world assets on-chain. BlackRock launched its tokenized USD Institutional Digital Liquidity Fund (BUIDL), on the ethereum blockchain in March this year in partnership with Securitize.

Securitize also said in a statement that it is launching Securitize Fund Services to offer institutions the ability to manage funds more efficiently with seamless integration of tokenized real-world asset capabilities.

Carlos Domingo, co-founder, and chief executive of Securitize, said in a statement: “We are proud to provide our customers with an all-inclusive, one-stop platform for their investment needs, combining Securitize’s expertise in tokenization, regulated primary and secondary sales of tokenized assets, and transfer agent services with our new fund administration capabilities.”

Digital foreign exchange swap

In another expansion of the tokenized fund ecosystem, Citi and Fidelity International said in a statement on 4 November that they had completed a proof-of-concept of an on-chain money market fund with a digital foreign exchange swap under the MAS’ Project Guardian. This enables investors to conduct seamless and real-time settlement of multi-asset positions in different currencies, which is currently not possible with traditional market infrastructure.

Citi and Fidelity International added this could also enable investors to access higher yields on foreign cash funds while managing liquidity and foreign exchange risk in real-time. For example, a corporate treasurer holding non-USD working capital could invest in US dollar denominated money market funds to enhance portfolio diversification and yield potential while ensuring continuous operational liquidity.

Emma Pecenicic, head of digital propositions and partnerships, APAC ex Japan distribution at Fidelity International, said in a statement: “As a global asset manager, we are excited to engage with partners like Citi to explore technological innovations like this on-chain money market fund with digital foreign exchange swap solution to better understand the efficiencies it can bring, as well as help establish best practices and standards for tokenized funds for the benefit of investors.”

Deepak Mehra, global head of digital assets and international lead for strategic investments for markets at Citi added that while the proof of concept tested settlement of tokenized money markets denominated in foreign currencies, the underlying technology could potentially be expanded to unlock further efficiencies and enable compatibility with other tokenized assets.

Tokenizing US Treasuries

🧵What is tokenization in the treasury market?

Tokenization digitizes traditional assets—like U.S. Treasuries—on the blockchain, aiming for faster, more secure transactions that reduce risk and streamline operations.

— Securitize (@Securitize) November 5, 2024

🧵 Boosting Collateral Management

With tokenized Treasuries, collateral transfers could be automated through smart contracts, efficiently moving assets when certain conditions are met—a potential game-changer for institutions.

— Securitize (@Securitize) November 5, 2024

🧵 New Products and Innovations

Bundling tokenized Treasuries with other assets could bring unique financial products to market, adding flexibility and attracting more demand in traditional finance. 📣

— Securitize (@Securitize) November 5, 2024

🧵 Tokenization is just beginning to show its potential in the U.S. Treasury market. The Treasury’s report hints at a future where traditional finance and blockchain evolve side-by-side.

🔗Full report: https://t.co/0BCY4KC5cr

— Securitize (@Securitize) November 5, 2024