Launched as part of the Monetary Authority of Singapore’s (MAS) Project Guardian, the transaction lays the foundation for more efficient cross-border distribution and settlement of capital markets instruments

Zurich, Japan, Singapore, 15 November 2023 – UBS, SBI and DBS have launched the world’s first live repurchase transaction (repo) with a natively-issued digital bond on a public blockchain. The transaction automatically and instantly settled a repo, digital bond purchase and redemption using regulated digital payment tokens, across regulated entities located in three different jurisdictions (Japan, Singapore, Switzerland).      

Conducted as part of MAS’ Project Guardian, the transaction highlights how blockchain technology enables cross-border distribution and settlement of capital market instruments in a highly efficient, flexible and cost-effective manner while enhancing liquidity management for institutions.  

The transaction involved a repo to borrow tokenized Japanese Yen (JPY) against a JPY-denominated natively-issued digital bond, with the borrowed tokenized JPY used to finance the purchase of the same bond. The subsequent digital bond redemption and payment of principal and interest at maturity was executed on-chain as well, demonstrating the potential to cover an entire transaction lifecycle on a public blockchain.     

Mike Dargan, UBS Group Chief Operations and Technology Officer said: “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. The flexible nature of our UBS Tokenize service, allowed our partners to easily adapt and leverage our innovative product framework and technology capabilities, to their infrastructure and transaction needs.” 

Fernando Luis Vázquez Cao, Chief Executive Officer of SBI Digital Asset Holdings said: “At SBI Digital Asset Holdings (SBI DAH), we are building an institutional grade digital asset ecosystem and are ready for its commercialization. This groundbreaking transaction demonstrates what can be done in Japan and cross-border, in providing innovative and efficient products and services to the market and clients. It is also 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.”     

This transaction demonstrated benefits for financial markets, such as: real-time 24/7 settlement, operational and capital efficiency while ensuring compliance and security requirements.

As part of Project Guardian in 2023, UBS Asset Management also collaborated with SBI Digital Markets to conclude a technical pilot for the issuance and distribution of a tokenized Variable Capital Company (VCC) fund on a permissioned environment of the Ethereum network. The pilot is part of UBS’s global distributed ledger technology strategy, focused on leveraging public and private blockchains networks for enhanced fund issuance and distribution. It also forms part of the broader expansion of UBS’s tokenization services through UBS Tokenize.   

From the SBI group perspective, the transaction and broader participation in Project Guardian are the result of the new ecosystem of institutional grade digital asset infrastructure developed by SBI DAH. This includes SBI Digital Markets, AsiaNext, SBI Zodia Custody and SBI Security Solutions. The company also engages closely with licensed group companies such as SBI SECURITIES, Shinsei Trust & Banking among others to bring digital solutions to the market.     

Note to the editor:  A repo is a form of short-term borrowing that involves one party selling a security to another for cash, with the seller agreeing upfront to repurchase the same security from the buyer in the future at a higher price. In so doing, the seller is effectively borrowing cash from the buyer using the security as collateral, with the repurchase being a repayment of the loan and the higher price reflecting the interest rate. Financial institutions tap repo markets for several reasons, including to access short term funding to meet liquidity requirements or to finance capital market transactions such as security issuance underwriting.