How crypto is forcing banks, funds towards new digital asset markets

afr.com:

Earlier this month, Swiss investment bank UBS launched a “tokenised” investment fund under a pilot project being run by the Monetary Authority of Singapore.

By representing rights to the money market fund in a digital contract, registered on the Ethereum blockchain, UBS Asset Management said it would improve processes for fund issuance, distribution, subscriptions and redemptions.

US fund management giant, Franklin Templeton, is also experimenting with the emerging technology. It has created a money market fund, known as Benji, the first US-registered mutual fund to use a public blockchain (also Ethereum) to process transactions and record share ownership.

While it is early days, Franklin Templeton says the cost of running Benji is 10 times lower than its traditional funds. Christopher Jensen, its director of research, told an event in New York last month this was allowing higher yields to be passed through to investors.

Some of the largest global financial institutions are seeking to unlock efficiencies from blockchain. iStock/Getty

The “tokenisation” of real-world assets – think investment funds, national currencies, bonds, commodities, or rights to a carbon credit – is the latest buzz topic in financial services. The concept describes creating a digital representation of the legal title to a financial asset to allow it to be exchanged over blockchain technology – which banks are exploring as new infrastructure for financial markets.

Despite the scandal at failed crypto exchange FTX, other US financial giants are moving in on the space. In August, PayPal created its own stablecoin – essentially a tokenised form of the US dollar. The new form of money has the potential “to transform payments” in the emerging area of the