Chainlink, UBS Asset Management, Swift Complete Pilot to Extract Cash From Tokenized Funds

The pilot was run as part of the Monetary Authority of Singapore's Project Guardian.

Blockchain company Chainlink, global financial messaging platform Swift and the asset management unit of Swiss bank UBS have successfully completed a pilot testing the ability to settle and redeem fiat cash from tokenized funds.

The project, completed as part of the Monetary Authority of Singapore's (MAS) Project Guardian, showcased how Swift's infrastructure can facilitate off-chain cash settlements for tokenized funds. It also demonstrates how tokenization and blockchain can work to improve, not replace, Swift, which connects over 11,500 financial institutions in more than 200 countries.

As Singapore and other jurisdictions around the world offer more tokenized funds, the ability to gain quick and efficient access to cash — which is what the multitrillion dollar traditional finance (TradFi) industry wants to settle in — is important.

"I think this shows where we're going with our work with Swift and how it can be useful for various parts of the financial services industry," Sergey Nazarov, co-founder of Chainlink, told CoinDesk in an interview.

Nazarov said the pilot enables the huge market of TradFi investors to subscribe to tokenized funds via a Swift transfer they are already familiar with, and not a stablecoin, central bank digital currency (CBDC) or other digital asset.

"We've been emphasizing for years the need for the large institutional market, where most of the world's value currently resides, to flow into the blockchain industry. We're now helping facilitate this shift in a reliable, technical and secure way," Nazarov said.

As part of the pilot, Swift’s system, combined with Chainlink’s platform, also facilitated the automatic minting and burning of UBS tokenized fund tokens.

The pilot was run as part of a broader initiative by MAS to explore the use of decentralized finance (DeFi) applications within the traditional financial system. Chainlink, Swift and UBS began working on the project in August 2022.

"This successful pilot demonstrates the potential of Swift's infrastructure to support the settlement of tokenized assets, enabling seamless integration between traditional and decentralized finance," said Wim Raymaekers, Swift's head of banking markets.

“We are excited to continue exploring how our services can further contribute to the development and adoption of new financial technologies."

The pilot also highlighted the use of Chainlink's decentralized oracle network to automate and secure the flow of data and events between on- and off-chain applications.

"This pilot showcases the power of Chainlink oracles to integrate and automate complex financial processes, enabling traditional finance institutions to efficiently participate in the rapidly growing world of tokenized assets," said Nazarov.

“We expect to see more institutions adopt Chainlink oracles as the demand for DeFi and Web3 services continues to grow."

The pilot was completed on Dec. 14, 2023, and the parties involved said they are now exploring opportunities to expand the use of Swift's infrastructure for the settlement of tokenized assets.

"UBS is committed to driving innovation in the asset management industry and we believe that tokenization has the potential to revolutionize the way funds are managed and accessed," said Michael Baldinger, head of UBS Asset Management.

“We are pleased to have participated in this successful pilot, which showcased how Swift's infrastructure can be utilized to facilitate efficient and secure cash settlements for tokenized funds."

Edited by Siu Lung Fung at siulung.fung@dowjones.com

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