In a significant leap towards the future of finance, the Bank of China’s investment banking arm, BOCI, and Swiss banking giant UBS have come together to make a monumental move – the issuance of a fully digital tokenised security in Hong Kong. A first for a Chinese financial institution, this event marks the dawning of a new era in the financial sector, underscoring the transformative potential of blockchain technology and tokenised securities.
Tokenised securities, or security tokens, are digital versions of traditional securities such as stocks or bonds, whose ownership is tracked via blockchain technology. These tokens can democratize finance by allowing fractional ownership and improving liquidity, thus making previously illiquid assets accessible to a broader range of investors.
Leading financial institutions such as Citigroup and Bank of America anticipate that the tokenisation of real-world assets (RWA) – encompassing conventional financial instruments like notes and bonds – could spur the adoption of cryptocurrency and funnel trillions of dollars’ worth of value into blockchain networks.
BOCI issued 200 million yuan ($28 million) in fully digital structured notes, tokenised on the Ethereum blockchain, a public, decentralized platform known for its smart contract functionality. UBS originated the product, which was allocated to its clients across the Asia-Pacific region. This initiative is the first of its kind in the region, established under Hong Kong and Swiss law.
UBS is no stranger to tokenised securities. In December 2022, the bank issued a $50 million tokenised fixed-rate note under English and Swiss law on a permissioned blockchain. This new venture with BOCI signifies the first successful introduction of regulated securities onto a public blockchain.
Transformative Power of Blockchain
Both BOCI and UBS have shown enthusiastic support for blockchain technology’s potential in the finance industry. Aurelian Troendle, the Global Head of MTN Trading at UBS, emphasized that “High-frequency issuance activity can benefit from vast efficiency gains through the use of blockchain technology,” a clear nod to the transformative power of blockchain.
Meanwhile, Ying Wang, BOCI’s Deputy CEO, expressed BOCI’s dedication to leading the digital transformation of Hong Kong’s financial industry, stating that they are “streamlining digital asset markets and products for Asia-Pacific customers.”
This groundbreaking step coincides with a broader push towards crypto regulation in Hong Kong, as the city opens up to public retail trading of cryptocurrencies and encourages digital currency exchanges to become licensed.
The collaboration between BOCI and UBS sets a precedent for the increasing acceptance of blockchain technology in traditional finance. As we enter this new era of digital finance, the landscape of the global financial market is transforming, opening up new avenues for investors and institutions.
China’s Growing Influence
In the wider context of digital finance, the partnership between BOCI and UBS is just one piece of a larger puzzle. Recently, China has shown an accelerated interest in blockchain technologies and digital assets, demonstrated by the release of a white paper on web3 innovation and development. This document lays out China’s ambitious vision for the future of internet technologies, with a significant emphasis on blockchain and decentralisation.
The impact of these efforts has not gone unnoticed. Changpeng “CZ” Zhao, the CEO of Binance, one of the world’s largest cryptocurrency exchanges, has noted the buzz among Chinese-speaking communities around these developments. This heightened interest signals a shift in perception towards blockchain technology.
The pioneering move by BOCI and UBS is an exciting step forward in the evolution of finance. It reflects the rising trend of tokenised securities and the growing recognition of blockchain technology’s potential. As traditional finance and digital assets continue to merge, the financial industry is set to undergo significant changes. This innovative collaboration is a strong signal that tokenisation is not merely a buzzword, but a transformative force that is reshaping the future of finance.