DeFi: UBS launches Ethereum-Based money market fund
DeFi: UBS launches Ethereum-Based money market fund
Will the $5.7T investment bank catch up with BlackRock?
GM Fintech Futurists,
Today we highlight the following:
DIGITAL ASSETS: UBS Asset Management launches its first tokenized investment fund
CURATED UPDATES: Financial Institutions and Adoption; DeFi and Digital Assets; Blockchain Protocols; NFTs, DAOs and the Metaverse
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DIGITAL ASSETS: UBS Asset Management launches its first tokenized investment fund
UBS Tokenize, the UBS in-house tokenization service, has launched its āUSB USD Money Market Investment Fund Tokenā (āuMINTā) on Ethereum. Access to the fund will originally be restricted to authorized distribution partners, with DigiFT being the first partner. This is fairly common practice for regulated entities, similar to BlackRockās BUIDL money market fund, which initially partnered with Securitize.Ā
UBS has been committed to innovation around blockchain-based securities.
In November 2022, UBS issued a digital bond valued at CHF 375 million, marking the world's first publicly traded digital bond. This bond is listed on both the SIX Swiss Exchange and the SDX Digital Exchange, allowing settlement via traditional or blockchain-based methods.Ā
In June 2023, UBS collaborated with the Bank of China International (BOCI) to issue a tokenized fixed-rate note on the Ethereum blockchain. This initiative aimed to streamline the bond issuance process and enhance market liquidity.Ā
UBS also launched a live pilot of a tokenized Variable Capital Company (VCC) fund in October 2023 as part of Singapore's Project Guardian. The pilot utilized UBS Tokenize to conduct fund subscriptions and redemptions via smart contracts on the Ethereum blockchain, with the aim of improving market liquidity and access for clients.
To highlight the opportunity size for UBS alone, we note that it manages over $5.7 trillion in assets.Ā It had acquired Credit Suisse, its historic investment banking competitor, last year. The firm has several large money market fund products, and runs a wealth management, asset management, and capital markets business ā each of which could be impacted by a tokenized cash product.
Tokenization in the fund space has been the major blockchain application for banks. Last week, Franklin Templeton expanded its money market fund to the Base L2. In March 2024, BlackRock launched its first tokenized fund, the BlackRock USD Institutional Digital Liquidity Fund (BUIDL), on the Ethereum blockchain. This fund allows qualified investors to earn U.S. dollar yields by subscribing through Securitize Markets, LLC. The fund invests 100% of its total assets in cash, U.S. Treasury bills, and repurchase agreements, enabling investors to earn yield while holding the token on the blockchain.Ā
Other large banks like JPMC have been utilizing blockchain for payments and short-term lending markets. Its Onyx platform processes approximately $1B in daily transactions.Ā
Tokenization of securities brings greater transparency, fractionalization, 24/7 availability, verifiability, and accessibility. Investment products can benefit from allowing more retail users to participate through fractionalisation via tokens, while also benefiting from transparent tracking of ownership for KYC and user insights.Ā
Going a step further, we could see governance mechanisms implemented ā providing users with greater participation in decision-making, within thresholds, for their investment decisions. This would reflect the type of corporate action participation currently taken on behalf of shareholders by third parties. This could make investment products more participatory and engaging.
McKinsey expects the total tokenized market capitalization to reach $2 trillion by 2030, with $4 trillion as the bullish case. This would be driven by mutual funds, ETFs, alternatives, as well as pure capital market products like fixed income and derivatives. To reach these estimates, market infrastructure providers and financial institutions will have to collaborate and adopt common tools. Otherwise, fragmented networks of limited offerings will lead nowhere. Efforts such as the Monetary Authority of Singaporeās Project Guardian and Regulated Settlement Network are steps in this direction.
Another positive is seeing banks opting for public blockchains like Ethereum (and Solana), instead of private / consortium blockchains. As an example, early enterprise blockchain startup R3 is up for an exit after failing to convert its consortia into product market fit. Choosing a public network, like choosing the public Internet, creates a more sustainable cost-base for financial institutions. They can rely on mutualized security and open-source development, as well as eventually tapping into the distribution of decentralized finance market venues.
It has been slow going, but tokenization continues as a trend at large financial institutions. The happy case in a decade is that blockchains are home to many global financial products, incorporated into the daily lives of more people. But while we like the trend, it is also important to recognize the profound barriers that traditional financial companies have in transforming their businesses and making innovations commercial.
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Long Take: Why Stripe bought stablecoin start-up Bridge for $1.1B
In this article, we analyze Stripe's acquisition of Bridge, a young company focused on stablecoin payments, for $1.1 billion.
Stripe, previously skeptical of crypto, now sees stablecoins as a superior financial infrastructure compared to legacy systems. Bridge, which moved $5 billion annually at its last raise, was acquired not for its revenue but for its strong team, product maturity, and the massive opportunity in stablecoin-based infrastructure for business banking. Stripe's move aligns with the growing relevance of stablecoins, which processed $7 trillion in volume in 2022, as it targets the untapped potential of integrating stablecoins into the corporate financial world. This acquisition mirrors prior tech successes like Facebook's Instagram buy, and positions Stripe to leverage stablecoins for future growth.
Curated Updates
Here are the rest of the updates hitting our radar.
Financial Institutions and AdoptionĀ
ā Coinbase to Integrate Visa Direct to Deliver Real-Time Account Funding for Customers - Visa
STOKR raises $7.98 million to establish one of first corporate bitcoin treasuries in Europe - The Block
Bolivia continues crypto momentum as bank launches USDT custody - CoinTelegraph
Robinhood Launches Presidential Election Betting Market Allowing Users To Wager On Harris And Trump - Forbes
DeFi and Digital Assets
ā Trump Crypto Project World Liberty Financial Sets Token Sale Date - Decrypt
Stripe to pay $1.1bn for stablecoin platform Bridge - Finextra
Nexo Sheds Crypto Lender Label, Rebrands as a āDigital Asset Wealth Platformā - Decrypt
Gate.ioās Telegram Mini Program Streamlines Asset Management - Decrypt
Blockchain Protocols
ā Towns raised $25.5 million from Andreessen Horowitz ā The on-chain messaging platform launches today - Fortune
AI Data Collection Startup Sapien Raises $10.5M Seed Funding Led by Variant - CoinDesk
Nillion network raises $25M for decentralized privacy solutions - CoinTelegraph
Ithaca raises $20m in new funding - Fintech Collective
Ethereum Creator Vitalik Buterin Proposes Huge Changes to Network - Decrypt
NFTs, DAOs and the Metaverse
ā Defending digital ownership in gaming: Immutableās response to the SECās Wells Notice - IMX
Gaming startup Azra Games raises $42M - Blockworks
Praxis gets $525M for utopic crypto, AI-friendly city - CoinTelegraph
Pudgy Penguins Game āPudgy Partyā Revealed for iOS and Android - Decrypt
Major League Soccer Launches āMLS Questā Collectibles on Sui - R\Scene
āAssassinās Creedā Maker Ubisoft Releases First Original NFT Game āChampions Tacticsā - Decrypt
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