As part of Singapore’s Project Guardian tokenization trials, UBS, SBI and DBS Bank executed a repurchase transaction (repo) of a natively issued digital bond on a public blockchain. The transactions spanned three jurisdictions, Japan, Singapore and Switzerland.
Regulators are still wary about the institutional use of public blockchain. One of the aims of Project Guardian is to show what’s possible. Additionally, this transaction demonstrated real-time atomic settlement and capital efficiencies.
“With this pioneering transaction, we proved the feasibility of executing a fully automated and instantly settled transaction across several jurisdictions by leveraging a public DLT network under a strict compliance framework,” said Mike Dargan, UBS Group’s Chief Operations and Technology Officer.
Repo is widely used by banks for short term finance in which they sell a bond and agree to repurchase it a day or week later. In this transaction, a JPY bond was natively issued on a public blockchain using the UBS Tokenize platform. The settlement was instant using a JPY stablecoin issued by SBI’s Shinsei Trust & Banking. The repo transaction involved borrowing Japanese yen against the bond, with the proceeds used to buy more bonds.
Eventually, it was unwound and the bond was redeemed. That part of the process – paying the principal and interest at maturity were all executed on chain. Hence the entire lifecycle took place on the public blockchain.
Fernando Luis Vázquez Cao, CEO of SBI Digital Asset Holdings (SBI DAH) said the transactions were “an example of the strength of partnerships SBI DAH has with large global institutions and across the SBI group, with SBI SECURITIES as counterparty to the repo transaction and Shinsei Trust & Banking as the issuer of JPY stablecoin.”
As an aside, Japan supports different types of stablecoins, including those directly issued by a bank or ones issued by a trust bank on behalf of an issuer holding the reserve assets in trust.
UBS and SBI tokenization activities
UBS Asset Management conducted another pilot under Project Guardian for a tokenized money market fund as previously reported. This involved a collaboration with SBI Digital Markets.
Meanwhile, SBI has a wide array of blockchain activities. One of the features of blockchain is they are global and linking jurisdictions is part of SBI’s goals. Hence this Project Guardian use case’s international dimension is typical.
SBI recently invested in Standard Chartered’s Zodia Custody. Plus, Zodia formed a digital asset custody joint venture with SBI DAH in Japan, SBI Zodia Custody. SBI Digital Markets provides advisory, tokenization and custody services. And AsiaNext is a joint venture with Switzerland’s SIX. With an institutional focus, it aims to create cross broder secondary markets for crypto and digital securities.
You will note there was little mention of DBS Bank. Because of several banking outages, the Monetary Authority of Singapore has banned DBS from participating in certain activities for six months, including innovation.
