UBS Hong Kong and OSL Pioneer Tokenization of Warrants on Ethereum

February 9, 2024

By Sharan Kaur Phillora

UBS Hong Kong has partnered with cryptocurrency exchange OSL to tokenize an investment warrant on the Ethereum blockchain, marking a significant milestone in the financial industry’s embrace of blockchain technology.

Here’s what we know:

Announced on February 7, this innovative venture involves the tokenization of an options call warrant, with Xiaomi Corporation, a leading Chinese smartphone manufacturer, serving as the underlying stock.

The tokenized warrant, now a digital asset, was subsequently sold to OSL Exchange, showcasing a novel approach to handling equity-linked structured products. OSL CEO Patrick Pan highlighted the initiative’s comprehensive simulation of the product’s lifecycle, from token creation and simulated secondary market transactions to the eventual token burn at maturity.

Winni Cheuk, Head of Sales at UBS Global Markets, emphasized the myriad benefits this tokenized product offers, including enhanced transparency, reduced transaction fees, streamlined settlement processes, and the flexibility of extended trading hours. These advantages underscore the transformative potential of blockchain technology in refining traditional financial instruments.

The announcement from UBS outlined several key benefits of financial derivative tokenization, such as opening new accessibility channels, boosting efficiency, and leveraging blockchain’s immutable ledger for unparalleled transparency. The use of smart contracts in tokenized warrants facilitates automation, simplifies trading, and reduces administrative costs.

UBS’s foray into asset tokenization is not new; the Swiss multinational has been exploring this domain since 2015. In recent developments, UBS issued a $50 million tokenized fixed-rate note to its Asia Pacific clients in 2022 through its UBS Tokenize platform. Furthermore, in June 2023, UBS facilitated a significant issuance of digital structured notes worth 200 million Chinese yuan on the Ethereum blockchain in Hong Kong.

About the author

Sharan Kaur Phillora’s thirst for knowledge has led her to study many different subjects, including NFTs and Blockchain technology – two emerging technologies that will change how we interact with each other in the future. When she isn’t exploring a new idea or concept, she enjoys reading literary masterpieces.

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