Tokenization with UBS & JP Morgan

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Introduction

Tokenization the conversion of real-world financial assets into digital tokens on blockchain, is gaining momentum in mainstream finance. Traditional banking giants like JPMorgan Chase and UBS are at the forefront of this trend, launching both live platforms and pilot initiatives that bring institutional credibility to tokenized securities. In Europe especially, progressive regulations and market interest have spurred these banks to experiment with blockchain-based bonds, digital cash tokens and new settlement systems. This report provides a strategic overview of each bank’s tokenization efforts, highlighting key technologies (such as JPMorgan’s Onyx platform), major milestones (e.g. tokenized bonds and repo trades), partnerships and how these moves are laying groundwork for broader capital markets adoption.

JPMorgan Chase | Embracing Tokenization with Onyx

JPMorgan has taken a bold, strategic approach to blockchain through its dedicated division Onyx (launched 2020), aiming to reinvent payment and settlement infrastructure. A centerpiece is JPM Coin, an institutional digital currency backed by bank deposits. JPM Coin was one of the first bank-issued stablecoins and operates on a permissioned version of Ethereum (Quorum) within Onyx. It is used to facilitate 24/7 intrabank and interbank transfers for corporate and institutional clients. Notably, JPMorgan’s Interbank Information Network (IIN),now part of Onyxonnects over 300 banks for information-sharing and payments, underscoring the firm’s ecosystem strategy​. As of late 2023, JPM Coin has scaled up to handle around $1 billion in transactions daily, demonstrating significant uptake and trust in this tokenized deposit model.

JPMorgan’s tokenization initiatives extend beyond payments into securities and lending markets:

Onyx Digital Assets & Tokenized Collateral: Onyx enables tokenization of traditional assets (like U.S. Treasury bonds) to streamline settlement. In 2020, JPMorgan conducted one of the first blockchain-based intraday repo trades, swapping tokenized U.S. Treasury securities against cash tokens on its ledger. This allowed repurchase agreements to be executed and settled in minutes instead of days, proving the efficiency gains for capital markets. The platform has since facilitated daily intraday repo transactions for clients, freeing up liquidity with near real-time settlement.

Blockchain Bonds and Deposits: JPMorgan has helped clients experiment with issuing financial instruments on blockchain. For example, it has used Onyx to tokenize certificates of deposit and test tokenized bonds in pilot projects. The bank is also reportedly extending JPM Coin to euro-denominated payments, an important step for European markets, essentially creating euro deposit tokens for cross-border transactions. By integrating tokenized cash in multiple currencies, JPMorgan is positioning Onyx as a global settlement network spanning the US, Europe and Asia.

Partnerships and Ecosystem: JPMorgan frequently collaborates with other institutions and regulators to advance tokenization. It co-founded Partior (with Singapore’s DBS and Temasek), a blockchain-based interbank network for cross-border payments and FX settlement. Under Project Guardian in Singapore, JPMorgan piloted decentralized finance techniques for trading tokenized bonds and foreign exchange with other banks, using public blockchain protocols in a regulated setting. These collaborations illustrate a broad ecosystem strategy: leveraging partnerships to test interoperability between Onyx’s private networks and external blockchain platforms and to ensure regulatory support.

JPMorgan’s proactive engagement with regulators has been key to its success. Onyx’s platforms operate under regulatory oversight and the bank’s involvement in sandbox projects (in Singapore, the US, and Europe) helps shape rules for tokenized assets. By combining in-house innovation (Onyx) with consortium efforts, JPMorgan has emerged as a leading advocate for blockchain in banking, providing a blueprint for leveraging tokenization to improve efficiency in payments, debt issuance, and settlement infrastructure.

UBS | Pioneering Tokenized Finance in Europe

Swiss banking leader UBS has been an early adopter of blockchain in capital markets, with a strategy sharply focused on European financial infrastructure. UBS’s journey began with foundational research and consortium building. In 2015, it launched an innovation lab in London to explore blockchain technology. By 2016, UBS spearheaded the concept of a Utility Settlement Coin (USC). a digital cash token for interbank use. in partnership with other major banks (including BNY Mellon, Deutsche Bank, Santander and brokerage ICAP). The USC project (now evolved into the Fnality consortium) aims to create blockchain-based settlement tokens backed by central bank money, allowing institutions to exchange securities against a digital cash token with instant finality, bypassing traditional lengthy settlement. This early initiative signaled UBS’s strategic emphasis on improving post-trade processes via tokenization and cemented its role as a thought leader in the space.

UBS has since achieved significant milestones in bringing tokenized securities to market, especially under Switzerland’s progressive regulatory framework:

Digital Bond Issuance: In November 2022, UBS launched a groundbreaking tokenized bond, a CHF 375 million three-year senior unsecured note, marking one of the world’s first digital bonds by a large global bank. Issued under Swiss law, this bond is cryptographically recorded on the SIX Digital Exchange (SDX) blockchain while also being dual-listed on the conventional SIX Swiss Exchange. Importantly, it carries the same legal status and investor protections as a traditional bond, but with the added benefits of blockchain (faster settlement and potentially broader distribution). This issuance demonstrated real-world investor acceptance of tokenized debt and showcased interoperability between new digital market infrastructure and legacy systems. It stands as a major trust signal: a top-tier regulated bank issuing a public bond on DLT with regulatory approval.

SIX Digital Exchange & Market Infrastructure: UBS is a key participant in SIX Digital Exchange, the regulated digital asset exchange in Switzerland that went live in 2021. By engaging in SDX (both as an investor and user), UBS is helping build an ecosystem for trading and settling tokenized equities, bonds and other assets in Europe. The bank’s involvement provides liquidity and credibility to this new marketplace. UBS’s digital bond, for instance, was settled on SDX’s blockchain ledger, illustrating how traditional institutions can directly utilize new DLT-based financial market infrastructure. Additionally, UBS has explored tokenizing other assets (like structured products or fund units) on SDX in pilot programs, aligning its offerings with clients’ evolving interests in digital assets.

Tokenized Deposits and Cross-Border Pilots: Building on the USC concept, UBS continues to explore digital cash tokens that could complement central bank digital currencies for settlement. It has worked with central banks and organizations like the Bank for International Settlements on experimental projects, notably Project Helvetia, which in 2020-21 successfully integrated tokenized securities settlement at SDX with central bank digital money. Through these pilots, UBS and partners tested end-to-end transactions where cash and assets trade simultaneously on ledgers, proving that DLT can meet the high standards of national payment systems. Such regulatory collaborations (with the Swiss National Bank, European Central Bank, etc.) highlight UBS’s commitment to ensuring trust, compliance and interoperability in tokenized markets.

Partnerships and Consortia: Much like JPMorgan, UBS leverages partnerships to advance its strategy. It has been a driving force in the Fnality International consortium (which grew out of the USC project) to create utility settlement tokens in multiple currencies (USD, EUR, GBP, CHF, JPY) for use by clearing banks. UBS is also likely to participate in the EU’s upcoming DLT Pilot Regime through ventures like SDX or other European exchanges, to trade tokenized securities within a regulated sandbox environment. By working alongside peer banks, fintechs and central authorities, UBS is helping define common standards for tokenized assets, from ensuring legal clarity for tokenized bonds to establishing connectivity between different blockchain networks and traditional banking systems.

Institutional Trust, Regulation and Interoperability

Both JPMorgan and UBS have placed heavy emphasis on regulatory engagement and building institutional trust for tokenized securities. Their efforts illustrate that success in this arena requires more than just technology, it demands alignment with legal frameworks and the confidence of market participants:

Regulatory Engagement: These banks work hand-in-hand with regulators to navigate the legal uncertainties around digital securities. JPMorgan obtained regulatory approvals for JPM Coin operations (ensuring that tokenized deposits comply with banking regulations) and it has engaged regulators in the U.S. and abroad when rolling out Onyx services. UBS benefited from Switzerland’s advanced DLT legislation, which explicitly recognizes ledger-based securities, enabling its 2022 digital bond to have full legal equivalence to a traditional bond. Moreover, both banks participate in central bank-led trials (e.g. UBS in SNB’s and ECB’s trials, JPMorgan in MAS’s pilots), which helps regulators gain comfort with blockchain settlement. By proactively addressing compliance, KYC/AML, and investor protection issues, JPMorgan and UBS are setting important precedents for how tokenized finance can operate within existing laws rather than outside them.

Institutional Trust Signals: The involvement of globally systemic banks in tokenization sends a powerful signal to the market. It indicates that blockchain-based securities are not just experimental gimmicks, but viable instruments subject to the same rigor as traditional finance. For instance, JPMorgan’s ability to process $1B a day in real-world transactions on a blockchain-based system​  demonstrates performance and reliability at scale that smaller fintech projects have yet to match. UBS’s public digital bond issuance, underwritten and purchased by mainstream investors, similarly validates market appetite for tokenized assets when properly structured. These initiatives by trusted banks create a halo effect, reassuring other financial institutions, corporate issuers and investors that tokenization can be secure and beneficial. Each successful pilot or issuance builds credibility, helping to overcome the skepticism that often surrounds crypto-related technologies.

Interoperability and Standards: As multiple tokenization platforms emerge, interoperability is a focal point for both banks. JPMorgan’s strategy with Onyx includes connecting different networks, for example, linking its private Quorum-based networks to other blockchains or payment systems. Its Liink network (formerly IIN) and Partior venture are about connecting institutions on shared ledgers, which could eventually interlink with bond or payment tokens from other banks. UBS’s work through Fnality aims to ensure that a digital cash token can interface with various blockchain-based exchanges or settlement systems across jurisdictions. Both banks are likely contributing to industry standards (via organizations like ISO or the Enterprise Ethereum Alliance) to enable seamless movement of tokenized assets across platforms. This focus on interoperability addresses a key requirement for broader adoption, ensuring that different tokenization efforts don’t become isolated silos, but rather integrate into a cohesive global market infrastructure.

Broader Impact on Capital Markets Adoption

JPMorgan and UBS’s moves into tokenized securities are accelerating a transformation in capital markets, with implications that extend to many market participants:

Efficiency and Liquidity: By tokenizing securities and cash, these initiatives promise faster settlement cycles (potentially T+0 atomic settlement), reduced counterparty risk and 24/7 market operations. For example, JPMorgan’s blockchain-based repo trades showed that settlement could occur in minutes, freeing up collateral more quickly for reuse. Such efficiency gains can improve market liquidity and reduce costs (e.g., less capital tied up due to instant settlement finality). As these efficiencies are demonstrated in pilots and live transactions, other banks and exchanges are more likely to adopt similar methods to stay competitive.

New Use Cases and Market Access: Tokenization could unlock new use cases like fractional ownership of large assets (enabling broader investor access) or programmable securities with built-in compliance and coupon payments. The work of UBS and JPMorgan provides templates for these possibilities, a bond that is natively digital could be traded in smaller denominations or instantly collateralized in a decentralized lending market. Large banks pioneering these instruments might soon offer clients new products (e.g. tokenized deposit notes or digital trade finance instruments) that were not feasible before. This expands capital markets by bringing in new investors or enabling assets to be used more flexibly (such as using a tokenized bond as collateral across platforms).

Market Structure Evolution: If tokenized trading and settlement become mainstream, we could see a gradual overhaul of market structure. Functions of clearinghouses and custodians may evolve, for instance, blockchains can perform auto-clearance and record-keeping, so intermediaries might focus more on providing ancillary services (like ensuring regulatory compliance of smart contracts, or managing digital wallets for clients). JPMorgan and UBS are actively testing these waters and their involvement ensures that the traditional financial system’s safeguards (risk management, regulatory reporting, etc.) are built into new tokenized market models. Their projects may influence regulators to adapt rules (such as Europe’s pilot regime for DLT market infrastructures) to accommodate blockchain-based systems alongside existing systems, eventually leading to fully regulated digital exchanges for securities.

Catalyzing Industry Adoption: Perhaps most importantly, the leadership of JPMorgan and UBS in tokenized securities lowers the barrier to entry for others. Many peer banks and institutions observe these high-profile projects as reference cases. A successful bond issuance on blockchain by UBS, or the large-scale use of JPM Coin for corporate payments, encourages others to initiate their own pilots knowing that frameworks and best practices are emerging. Indeed, since these projects launched, we have seen other major players (e.g., European Investment Bank issuing digital bonds and other banks joining blockchain consortia) follow suit, echoing the trend. Over time, this network effect, with big banks, central banks, and market infrastructures all engaging – can lead to a tipping point where tokenized securities become an integral part of global capital markets rather than a niche.

In summary, JPMorgan and UBS have moved beyond theory to practical deployment of tokenized financial instruments, especially in Europe’s receptive environment. By leveraging proprietary platforms like Onyx and participating in collaborative ventures, they are addressing the technical, legal and trust challenges of tokenization. Their milestones, from instant blockchain payments to legally recognized digital bonds, are helping to bridge traditional finance with blockchain. As a result, the path is being paved for broader adoption, where efficiencies of distributed ledger technology can be realized at scale without compromising the stability and integrity of capital markets. Their pioneering efforts strongly indicate that tokenized securities are transitioning from pilot phase to an early phase of mainstream adoption, reshaping finance in the years ahead.

Sources: JPMorgan and UBS public disclosures, media reports and regulatory trial summaries​.) Each reference highlights the institutional approach to blockchain, from JPMorgan’s 300-bank network and daily $1B in JPM Coin transactions, to UBS’s leadership in blockchain settlement consortia, underscoring that these banks are fully invested in the future of tokenized capital markets.

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