UBS Issues Tokenized Warrant on Ethereum Blockchain – A Leap Forward in Derivative Products

.. By Nathan Daniels

February 9, 2024

2 min read

Reading Time: Read Time 2 minutes

UBS, a renowned global financial institution, recently made headlines by announcing the issuance of an investment-grade tokenized warrant on the Ethereum public blockchain in Hong Kong. Leveraging the UBS Tokenize issuance solution, the warrant, a call option on Xiaomi stock, was successfully sold to OSL Digital Securities, marking a significant milestone in the realm of blockchain-based financial products.

Reinforcing UBS’s Leadership in Derivative Products

Winni Cheuk, Head of Sales, APAC Public Distribution, UBS Global Markets, highlighted the significance of this development, stating, “The introduction of the UBS tokenized warrant reinforces the bank’s position as the leading derivative products issuer in Hong Kong.” Cheuk emphasized the innovative aspects of the product, which is created natively on a public blockchain within a permissioned environment. This pioneering approach enhances transparency, reduces transaction fees, streamlines settlement processes, and offers more flexible trading hours.

UBS’s Evolution in Tokenization Initiatives

UBS has been actively engaged in the institutional Distributed Ledger Technology (DLT) space for quite some time. As a co-founder of the institutional payment system Fnality, the bank has demonstrated its commitment to exploring blockchain-based solutions. More recently, UBS has been expanding its footprint in the realm of Web3.

In late 2022, UBS Wealth Management issued $50 million in digital debt securities to Asian high net worth individuals. This move was followed by the Bank of China Investment (BOCI) issuing digital structured notes on Ethereum using the UBS Tokenize platform. These initiatives underscore UBS’s dedication to embracing the potential of blockchain technology in transforming traditional financial instruments.

Participation in Blockchain Trials and Production Deployments

UBS has actively participated in various public blockchain trials, notably as part of Singapore’s Project Guardian. These trials encompassed diverse use cases, including tokenized money market funds and cross-border repo transactions. Collaborating with partners like SBI and DBS, UBS has explored the potential of blockchain technology in facilitating efficient and secure financial transactions across borders.

Moreover, UBS has ventured into production deployments, such as intraday cross-border repo transactions. By adopting Broadridge’s Distributed Ledger Repo (DLR), a permissioned blockchain infrastructure, UBS has demonstrated its commitment to leveraging blockchain technology for real-world applications. The bank’s involvement in cross-border intraday repo transactions with Asian counterparts further underscores its leadership in this domain.

Future Outlook and Collaboration

In related developments, UBS is among the five banks participating in Hong Kong’s second government digital green bond issuance. While the first bond utilized Goldman Sachs’ tokenization platform, HSBC’s Orion platform was employed for the second issuance. The successful application of UBS Tokenize in future bond issuances remains a promising prospect, indicating the bank’s continued collaboration and innovation in the blockchain ecosystem.

In conclusion, UBS’s issuance of a tokenized warrant on the Ethereum blockchain signifies a significant advancement in the realm of derivative products. As the financial industry increasingly embraces blockchain technology, UBS continues to play a pivotal role in driving innovation and unlocking new opportunities in the evolving landscape of digital finance.