In a significant move under the Monetary Authority of Singapore's (MAS) Project Guardian, Swift, UBS Asset Management, and blockchain oracle provider Chainlink recently concluded a pilot project focused on tokenized fund settlement.
This initiative utilized Swift's established global messaging network, which connects over 11,500 financial institutions, to incorporate tokenized fund transactions into the traditional fiat payment system.
The pilot project under MAS's Project Guardian explored how tokenized assets could function within existing financial frameworks. Swift's extensive infrastructure was used to facilitate fund redemptions and subscriptions, which traditionally involve multiple manual steps and delays, often increasing operational costs.
The initiative offers a solution that bypasses blockchain-only payment channels by connecting tokenized fund processes with conventional fiat systems. This allows financial institutions to settle tokenized transactions without requiring an entirely on-chain system, demonstrating a hybrid model for digital finance.
Sergey Nazarov, Chainlink's co-founder, expressed optimism about adopting off-chain payment capabilities, highlighting how they could increase capital flow and extend digital asset accessibility. The project aligns with recent discussions at the Swift-organized Sibos conference, where Nazarov outlined potential paths for integrating blockchain technology into Swift's global network.
Inefficiencies such as manual workflows and delayed settlements often affect traditional fund subscription and redemption processes. These issues limit liquidity and increase costs, potentially leading to missed opportunities in the global mutual fund market, estimated at around $63 trillion. Swift's infrastructure and Chainlink's blockchain technology were used to automate fund transactions, allowing real-time data access and reducing settlement delays.
According to Chainlink, its Oracle network facilitated the interactions needed for tokenized transactions. This included tasks such as the automated minting and burning of fund tokens to manage investor holdings efficiently. The pilot demonstrated how financial institutions could leverage existing infrastructure to conduct tokenized transactions seamlessly, offering an efficient, scalable, and cost-effective solution for the financial sector.
With the completion of this pilot, UBS Asset Management also launched a tokenized money market fund on the Ethereum blockchain called the UBS USD Money Market Investment Fund Token (uMINT). The fund caters to rising investor interest in tokenized financial assets and reflects a broader shift towards tokenized solutions in the financial industry.
In its recent Layer One Summit, the MAS emphasized the importance of tokenized assets and recognized the need for supportive infrastructure to scale these solutions. While progress has been made, MAS Deputy Managing Director Leong Sing Chiong noted that achieving industry-wide traction remains challenging, with the need for infrastructure to scale promising use cases.