Monday, 22 April 2024

UBS, SBI and DBS complete first cross-border repo with digital bond

5 min read

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 namely, Japan, Singapore and 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 tokenised Japanese Yen (JPY) against a JPY-denominated natively-issued digital bond, with the borrowed tokenised 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, group chief operations and technology officer at UBS, 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 Tokenise 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, CEO of SBI Digital Asset Holdings (SBI DAH) said: “At SBI DAH, we are building an institutional grade digital asset ecosystem and are ready for its commercialisation. 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 tokenised 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 tokenisation services through UBS Tokenise.

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.

Re-disseminated by The Asian Banker

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