In the first case of a Chinese-funded financial institution, BOCI teamed up with UBS to issue tokenized bills or a licensed version based on Ethereum

By Nancy, PANews

On June 12, Bank of China International (BOCI), a wholly-owned investment bank under Bank of China Limited, announced that it will cooperate with UBS to issue digital structured notes with a total value of RMB 200 million, becoming the first issuer in Hong Kong. A Chinese-funded financial institution that monetizes securities.

As soon as this news came out, it immediately aroused the attention of media at home and abroad and heated discussions outside. You must know that in the past, institutions used the form of alliance chains for tokenization, and BOCI's issuance of tokenized securities on the Ethereum public chain is of epoch-making significance. Therefore, at the same time as this heavy news was swiping the screen, the entire network also began to search for the relevant contract address of BOCI, but to no avail. According to market speculation, the tokenized bills issued by BOCI are more likely to be based on the licensed version of Ethereum.

According to the UBS announcement, UBS is responsible for initiating the first successful issuance of 200 million yuan fully digital structured notes by BOCI and selling them to its clients in the Asia-Pacific region. When the two parties issued this blockchain digital bill, they made new attempts in terms of applicable laws and blockchain types.

According to the UBS announcement, this issuance is the first in the Asia-Pacific region to be established under the laws of Hong Kong and Switzerland, the first to digitize the blockchain on the public Ethereum blockchain, and successfully introduce regulated securities into the public blockchain. Aurelian Troendle, Global Head of MTN Transactions at UBS Group, said, "By using blockchain technology, high-frequency issuance activities can benefit from huge efficiency gains, which will ultimately bring advantages to investors. UBS is very pleased to partner with We will cooperate with issuers such as Bank of China International to expand our customer services through our tokenization capabilities." At the same time, UBS also stated that it will continue to expand its tokenization services through UBS Tokenize, covering structured products, fixed income and repurchase financing.

According to UBS, if it is indeed issued on Ethereum, this tokenized bill transaction of up to 200 million yuan can be verified on the chain. As we all know, every transaction on Ethereum can view its sender and receiver addresses, transaction time, transaction amount, and the smart contracts involved. So, why can’t find any associated address of this transaction, and why didn’t the official directly choose to publish the relevant transaction hash to prove the authenticity to the outside world?

In this regard, independent researcher Jason tweeted that the adoption of the "main Ethereum blockchain" mentioned in the original UBS article is actually not the main network of Ethereum, but a centralized alliance chain deployed by Ethereum as an open source code. In fact, although the permission system of the public chain and the alliance chain is different, Ethereum is an open source platform that allows the construction of a private licensed version.

UBS has made many attempts to tokenize assets on the permissioned blockchain. For example, in May 2021, UBS Group provided a pilot plan for tokenizing physical assets for more than 100 institutional clients; In December, UBS successfully sold US$50 million blockchain-based digital fixed-rate notes for Asia-Pacific high-net-worth individuals and family offices, which were established under British and Swiss laws and digitized on a licensed blockchain.

In fact, traditional financial institutions have played similar games before. For example, in November 2022, Onyx, a blockchain company under JPMorgan Chase, completed its first cross-border transaction using DeFi on the public chain Polygon, supported by the DeFi lending agreement Aave and DEX Uniswap. But this first real-world use-case trial of an institutional-grade DeFi protocol actually saw the team deploy a modified version of Aave Arc, a licensed version of the DeFi lending protocol that complies with anti-money laundering regulations, to the Polygon network, allowing banks to set up their own specialized Transaction parameters.

Although more and more traditional financial institutions are currently exploring RWA (Real World Assets), these platforms usually choose permissioned blockchains to expand their business. For example, in February this year, the Hong Kong Special Administrative Region government announced the use of Goldman Sachs tokenization platform GS DAP to digitally issue an HK$800 million government green bond program (GGBP) on a private blockchain network; In the first quarter of 2023, the European Investment Bank (EIB) cooperated with BNP Paribas, HSBC and Royal Bank of Canada Capital Markets in Sterling-denominated digital bonds issued on private blockchains and more.

From this point of view, under the uncontrollable risks such as policy compliance, supervision and transaction efficiency, traditional institutions still have a long way to go to truly deploy their business on the public chain. As for whether BOCI and UBS have played a "word game", perhaps only the disclosure of relevant transaction hashes can be convincing.