Swift's Successful Tokenized Fund Pilot with UBS and Chainlink

Swift, the global bank messaging network, announced on November 5, 2024, the successful conclusion of a pilot program designed to enhance tokenized fund settlement and redemption processes using fiat currency. This initiative was developed in collaboration with UBS Asset Management and Chainlink.

Objectives of the Pilot Program

The primary goal of this pilot was to connect digital asset transactions with existing fiat payment systems, thereby reaching over 11,500 financial institutions across more than 200 countries.

Challenges in Traditional Fund Processes

Traditional funds often face significant challenges, including:

• Inefficient subscription and redemption processes that require manual intervention.
• Delays in settlements.
• Lack of real-time transparency.

These issues lead to increased operational costs, diminished liquidity, and missed investment opportunities, particularly within the mutual fund sector.

Implementation of Blockchain Technology

During the pilot, financial institutions utilized blockchain technology to automate and expedite fund processes. By leveraging Chainlink’s platform alongside Swift’s network, the program facilitated efficient on-chain processing for tokenized fund subscriptions and redemptions without the necessity for direct on-chain payments. This resulted in a more streamlined and automated approach to fund transactions.

Collaboration with UBS Asset Management

This pilot builds on previous initiatives by UBS Asset Management and SBI Digital Markets, which focused on developing digital subscription and redemption systems for tokenized funds. It aligns with Singapore’s Monetary Authority’s (MAS) Project Guardian, which aims to foster innovation in digital finance by bringing together regulators and industry leaders.

Technical Aspects of the Pilot

The pilot employed Swift’s infrastructure to demonstrate comprehensive payment orchestration for fund subscriptions and redemptions. Chainlink’s platform played a crucial role in coordinating transactions and fulfilling the necessary conditions for UBS’s tokenized investment fund to mint or burn fund tokens on behalf of investors.

Insights from Key Stakeholders

Jonathan Ehrenfeld, Swift’s Head of Strategy, emphasized that the initiative supports seamless integration with existing payment systems and digital currencies. He noted that this collaboration under Project Guardian leverages Swift’s global network to connect digital assets with traditional systems.

Sergey Nazarov, Co-Founder of Chainlink, also highlighted the advantages of integrating Swift’s infrastructure to facilitate off-chain payments for digital assets. He expressed optimism regarding the future adoption of these capabilities, which could enhance capital flows and expand the digital asset user base.