As a seasoned analyst with over two decades of experience in the financial sector, I’ve witnessed the transformation of traditional finance into a digital realm. The recent development under MAS’s Project Guardian, where Swift, UBS Asset Management, and Chainlink have completed a pilot for tokenized fund settlement, is a significant stride towards digitizing finance without disrupting existing infrastructure.
Under MAS’s Project Guardian, Swift, UBS Asset Management, and the blockchain oracle network Chainlink have successfully conducted a trial run for settling tokenized funds using their technology.
This project leverages Swift’s worldwide financial messaging infrastructure (which serves more than 11,500 institutions) to seamlessly combine token-based investment procedures with traditional money transfer systems.
Instead of most blockchain tokenization initiatives, this project facilitates transactions using various payment methods, rather than just those tied to blockchain, thereby fostering digital finance utilizing current systems.
The pilot follows up on comments made by Chainlink co-founder Sergey Nazarov during the Swift-hosted Sibos conference on October 23rd, in which he explored the possibility of combining blockchain technology with Swift’s infrastructure.
Addressing inefficiencies
Manual processes and delayed settlements in conventional fund transactions, specifically during redemptions and subscriptions, often pose challenges that increase operational expenses and affect the flow of funds (liquidity).
The announcement disclosed that Swift’s system enables immediate redeeming of funds and subscription services for tokenized investment funds, thereby establishing a streamlined, economical, and transparent procedure.
The statement indicates that the pilot employs blockchain technology for transactions, “not requiring worldwide acceptance of a blockchain-based method of payment.
Nazarov expressed his enthusiasm over this recent advancement, particularly about the incorporation of “off-chain payment functionalities” which he believes will significantly boost the movement of financial resources.
Shift toward tokenized funds
Within the scope of Project Guardian, the pilot expands upon the efforts of UBS and SBI Digital Markets by establishing a digital platform for subscribing to and redeeming tokenized investment funds.
On November 1, UBS introduced a fund based on tokens into the Ethereum blockchain, catering to the growing demand among investors for financially-oriented digital assets.
The bank launched the money market fund dubbed the “UBS USD Money Market Investment Fund Token,” or the “uMINT,” to serve investors’ growing demand.
The Monetary Authority of Singapore (MAS) shared details about their advancements in turning assets into tokens for commercial use, using insights from approximately 40 institutions as a foundation. They aim to offer direction with information gathered from over 15 experimental projects.
At the inaugural MAS Layer One Summit, MAS deputy managing director Leong Sing Chiong highlighted the achievements of the major financial entities engaged in Project Guardian, showcasing how they’ve illustrated the promise of tokenization within foreign exchange and investment fund sectors.
Sing Chiong also identified the limitations of those trials:
“No one has really succeeded in achieving scale. Many promising use cases have not yet gained industry wide traction. Further, there is a need for supporting infrastructure to enable good use cases to scale beyond individual networks.”
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2024-11-05 15:59