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SBI Digital Markets, a subsidiary of the Japanese financial services giant SBI, has launched tokenized securities as part of Singapore’s tokenization initiative, Project Guardian. It has also partnered with Swiss bank UBS to venture into tokenized money market funds.
SBI Digital Markets (SBI DM), a subsidiary of Japan’s SBI based in Singapore, unveiled the new pilot this week as it seeks to expand its role in Project Guardian, a blockchain and digital assets initiative launched by the Monetary Authority of Singapore (MAS) in 2022. The initiative boasts some of the world’s largest financial industry players, from JPMorgan (NASDAQ: JPM) and DBS Bank (NASDAQ: DBSDY) to Temasek and Moody’s (NASDAQ: MCO).
In one of its key initiatives, SBI DM has partnered with the largest Swiss bank, UBS, to launch a tokenized money market fund. Dubbed the “UBS USD Money Market Investment Fund Token,” the fund was issued on a public blockchain network but is only accessible through authorized distribution partners; DigiFT, a regulated exchange for tokenized assets, was selected as the first partner, with others to follow.
Despite being on a public blockchain, the fund is only available to accredited investors. The Swiss lender does not impose a minimum investment, but partners, such as DigiFT, have the option of imposing such standards.
While UBS announced the fund last week, SBI DM only revealed that it played a key role in its issuance this week.
Tokenized funds are becoming popular, although they have yet to match the $63 trillion investment into traditional products. According to one data platform, the sector has attracted $2.35 billion in investment. Despite mainly appealing to blockchain enthusiasts, the sector is dominated by traditional finance, with two of the three largest tokenized funds issued by Wall Street giants BlackRock (NASDAQ: BLK) and Franklin Templeton.
“We have seen growing investor appetite for tokenized financial assets across asset classes. Through leveraging our global capabilities and collaborating with peers and regulators, we can now provide clients with an innovative solution,” commented Thomas Kaegi, the head of UBS Asset Management in APAC.
In another move, SBI DM revealed it’s developing a new tokenization framework that will connect stakeholders across borders, boosting liquidity and efficiency. The framework’s first asset-backed security is a structured note backed by luxury wines. In the future, it intends to expand the underlying products to include other commodities and intellectual property. The framework will facilitate both the issuance and secondary trading of securities.
SBI DM CEO Winston Quek says that this year, the company wants to play a central role in the end-to-end flow of tokenized securities.
“From origination, tokenization, distribution, digital custody, listing on digital asset exchanges and building secondary trading – we have put in place workflows for efficient cross-border distribution networks whilst allowing for dual issuances in traditional and tokenized formats,” he stated.
Project Guardian and similar tokenization efforts received a big boost this week when the MAS announced new frameworks to spur the sector’s growth. The central bank pledged to address the four pillars of tokenization: infrastructure, liquidity, standardized frameworks, and common settlement assets (it intends to solve this last one with a wholesale digital Singaporean dollar).
Swiss city of Lugano issues $137 million digital bond
Elsewhere, the city of Lugano in southern Switzerland has issued a CHF 120 million ($137.2 million) digital bond. The bond, issued via the SIX Digital Exchange (SDX), is the city’s third.
Lugano, renowned for its picturesque views, issued its first digital bond in January last year. The $114 million bond matures in 2029, making Lugano the first entity outside the financial industry to issue a bond on SDX. In February this year, the city followed it up with its second bond, worth $114 million, with settlement in a wholesale digital Swiss franc.
As with its previous two digital bonds, the latest can be held in the conventional SIX Swiss Exchange central securities depository (CSD) or the SDX digital CSD. It’s also dual-listed on both the SDX and SIX.
The city said in a statement, “Lugano has optimized its debt management strategy, obtaining more cost-effective financing than expected that will help support Lugano’s financial strength in the medium and long term.”
Despite using public blockchains, Lugano’s digital bonds are not available to the general public. They have been limited to commercial banks, and with the settlement done in a wholesale CBDC—which is still in a pilot phase—it’s unlikely that the public will participate anytime soon.
Similar digital bonds in some other jurisdictions are accessible to investors. In Hong Kong, for instance, investors can easily purchase digital bonds issued by local banks, such as HSBC, which has pioneered the sector with its Orion blockchain network.
Watch: Tokenized was built with blood, sweat and tears
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