• Fixed Income Pilot: creating liquidity by connecting regulated digital asset exchanges for tokenised asset-backed securities
• Asset and Wealth Management Pilot: streamlining subscriptions and redemptions with digital transfer agent smart contracts for a UBS tokenised money market fund

Singapore, 4 November 2024 – SBI Digital Markets (SBIDM) has renewed its participation in the Monetary Authority of Singapore’s Project Guardian pilots, taking part in the Fixed Income and Asset and Wealth Management pilots with a focus on driving commercial adoption. Through its collaboration with financial institutions, SBIDM is actively building an end-to-end framework for the primary and secondary market distribution of tokenised securities by connecting regulated digital asset exchanges across multiple jurisdictions. SBIDM is also partnering with blockchain technology leaders to achieve operational efficiencies and unlock cost savings for financial institutions.

Winston Quek, Chief Executive Officer of SBI Digital Markets, said: “This year, SBI Digital Markets has focused its efforts on building regulated frameworks to facilitate the end-to-end flow of tokenised securities. From origination, tokenisation, 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 tokenised formats. We have adopted open and interoperable architecture in both operational structuring and tech engineering to allow institutional investors at various stages of digital transformation to join our journey and unlock efficiencies through blockchain technology.”

Fixed Income Pilot: Tokenised Asset-Backed Securities

As part of the Fixed Income pilot, SBIDM set out to expand the distribution network of tokenised securities and create global secondary market liquidity for investors. SBIDM has set up a regulated structure for the securities to be issued in both traditional and tokenised formats to cater to all investors. To facilitate cross-border secondary market liquidity, SBIDM has connected regulated digital asset exchanges across multiple jurisdictions with a blockchain-agnostic technology and governance framework.

SBIDM will be launching this industry-first regulated end-to-end framework with the global secondary market in the next two months, with the first product being a structured note backed by luxury wines followed by intellectual property and commodities.

Asset and Wealth Management Pilot: UBS Tokenised Money Market Fund

Under the Asset and Wealth Management pilot, SBIDM built on the momentum of its 2023 Project Guardian technical pilot with UBS Asset Management. This year’s pilot sees the potential commercial application of a UBS tokenised fund with a Variable Capital Company (VCC) structure, achieving further operational efficiencies with smart contract-based automation of fund subscription and redemption workflows. Interactions between distributors, fund issuers and fund administrators were streamlined through an interoperable architecture that enhanced efficiency, transparency and reduces operational costs.

To facilitate cross-chain communication with the tokenised fund contract, SBI Digital Markets created a digital transfer agent smart contract, leveraging Chainlink’s industry-standard Cross-Chain Interoperability Protocol (CCIP). The pilot demonstrated the feasibility of using smart contracts and the Chainlink Platform to streamline fund operations across different blockchain networks and financial systems, unlocking a fundamental shift in operational efficiency and transparency for the US$63 trillion[1] mutual fund industry.

Driving Commercial Adoption

Beyond the commercial adoption of the tokenised money market fund and asset-backed securities, SBIDM is also working with partners on the commercialisation of a tokenised bond. This will see the commercial transaction arising from last year’s world’s first live repurchase transaction (repo) with a natively-issued digital bond on a public blockchain. SBIDM will announce more details on the transaction in the coming months.

About SBI Digital Markets (www.sbidm.com)

SBI Digital Markets is a subsidiary of SBI Digital Asset Holdings, the digital asset arm of Japan’s leading conglomerate SBI Group. With the largest securities account customer base and second-largest trading market in Japan, SBI Group has a global network across 25 countries including key markets in Asia and Europe. SBI Digital Markets offers clients a comprehensive digitalisation framework from origination, tokenisation, distribution to custodian services across traditional and Web 3.0 product suites.

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[1] The Business Times, 22 March 2024. “The mutual fund at 100: Is it becoming obsolete?”