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UBS Eyes Token Push

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The Swiss bank is looking to tokenize assets in its securities division. The push is part of a ring-fenced group of 100 UBS bankers tasked with modernizing the wealth manager.

Zurich-based UBS’ 18-month-old strategy lab for investment banking is considering how to tokenize various asset classes, UBS executive Chetan Tolia said at a media briefing in Zurich.

«We’re focusing on a number of projects in the so-called tokenization space,» Tolia said. «We’re pretty lucky here in Switzerland, as regulators have been quite forward-thinking in this space.»

Specifically, the wealth manager is initially looking to tokenize products including debt, structured products – and physical gold, two sources familiar with the matter told UBS, which didn’t elaborate on specifics, recently began transacting on trade finance platform, co-launched a so-called utility settlement coin with other banks, and is part of banking’s R3 blockchain consortium.

Alone vs Partnering

UBS’ token projects are still initial stages, said Tolia, who is head of digital business transformation for foreign exchange trading, rates, and credit. The Swiss bank hasn’t yet discussed the plans with potential partners.

«Our ultimate aim here is that this is going to be very broad-based with multiple players, not just UBS involvement,» he noted, «But it’s often quicker to get started alone and bring in others as the project matures.»

UBS’ interest in tokenizing assets comes as smaller players seek to shake up assets like private equity, which have until only been accessible to the very wealthy. They aim for a «democratization» of such assets by selling individual tokens representing slices of them.

Ring-Fenced Bankers

The comments represent a first assertive sign from the unit, which has quietly grown to roughly 120 people after starting with 80 people last year under Chris Purves, its former co-head of fixed income trading. Purves stocked the unit with long-standing UBS investment bankers as well as outside data scientists, coding and machine learning experts, and electronic trading specialists.

Purves’ team works in parallel to the wider innovation team run by Mike Dargan, outfitted with a $3.5 billion budget and roughly 20,000 employees. The principle is the same: The Swiss bank is vulnerable to more nimble and tech-focused challenger banks and fintech firms.

Tolia, a 21-year UBS veteran who is based in Zurich, said the unit is operating between 80 and 90 projects, mainly seeking «incremental» improvements. A minority of its projects center on more radical ideas like the tokenization projects.

Learning, Not Earning

While savings through technology like blockchain is a huge focus, Tolia tempered expectations for huge, quick wins. «A lot of the early part of radical innovation is learning, not earning, as we say.» Tolia, a 43-year-old computer scientist, began as a trainee with SBG Warburg in 1997 in London.

UBS’ investment bank is beginning to chop jobs, amid a disappointing quarter from the wider securities unit, as reported on Tuesday. CEO Sergio Ermotti is under pressure to tame a bloated cost base as it takes in less from clients.

The Swiss bank has, like most big banks, been openly hostile to cryptocurrencies, while open to distributed ledger technology. Finma, the Swiss financial regulator, has been broadly receptive to the nascent blockchain and crypto scene.