Chainlink and Swift Revolutionize Tokenized Fund Industry

By: Isha Das

Chainlink, in collaboration with Swift and UBS, has successfully piloted a novel system that has the potential to transform the trillion-dollar global fund industry. This initiative, announced on September 30, leverages existing messaging infrastructure to process tokenized fund subscriptions and redemptions, thereby facilitating greater digital asset adoption. By utilizing the existing Swift messaging infrastructure, banks and asset managers can process transactions using the ISO 20022 format, which are then routed through Chainlink's Runtime Environment (CRE) to trigger on-chain smart contract actions.

The pilot, involving UBS's tokenization unit, UBS Tokenize, marks a significant step in streamlining operations within the asset management sector. By avoiding the need for complete overhauls of identity or custody systems, institutions can smoothly transition into the tokenized finance space without incurring extensive costs or complexities. This "plug-and-play" model facilitates experimentation with tokenized fund systems, paving the way for potentially widespread adoption.

Furthermore, the implications for the asset management industry are substantial. The ability to manage tokenized workflows directly from legacy infrastructure could revolutionize operations, allowing for enhanced compliance automation, reducing reconciliation work, and increasing transparency. Such innovations provide the industry with opportunities to modernize while cutting operational costs. As noted by Chainlink co-founder Sergey Nazarov, this collaboration showcases how smart contracts and advanced technical standards can greatly enhance asset lifecycle efficiency.

In parallel, UBS is demonstrating how tokenization can be effectively deployed to enhance existing products and uncover new distribution models. The industry's focus on tokenization is driven by its potential to speed up settlement processes, mitigate operational risk, and provide new market flexibilities. As advances like the Chainlink-Swift integration continue, they might well mark the beginning of a broader adoption of tokenization across global capital markets.