Baker McKenzie advises on world`s first cross-border repo and natively-issued digital bond pilot as part of MAS’ Project Guardian

23 November 2023– An international Baker McKenzie team, consisting of Baker McKenzie Wong & Leow (the Singapore member firm of Baker McKenzie), Baker McKenzie Switzerland and Baker McKenzie Japan acted as legal advisor to DBS Bank (“DBS”), UBS AG (“UBS”) and SBI Digital Asset Holdings Co., Ltd. (“SBI”) on the world’s first cross-border repo and natively-issued digital bond fully executed and settled on a public blockchain. This transaction was part of Project Guardian by the Monetary Authority of Singapore, a collaborative initiative with the financial industry that seeks to test the feasibility of applications in asset tokenization and DeFi while managing risks to financial stability and integrity.

DBS, UBS and SBI successfully executed the live pilot for the issuance, repurchase and redemption of digitally native Swiss-law securities using stablecoins issued under Japanese regulations and tokenized certificates of deposits under Swiss law. The transactions were recorded on a public blockchain and featured atomic (instantaneous) settlements. The pilot trade was presented at the Singapore Fintech Festival.

The Project Guardian initiative currently involves 15 international financial institutions including DBS, UBS and SBI as well as policymakers — the Financial Services Agency of Japan (FSA), the Swiss Financial Market Supervisory Authority (FINMA) and the Financial Conduct Authority (FCA) in the UK.

Singapore-based Financial Services Regulatory Principal Stephanie Magnus and Zurich-based Corporate Finance Partner Dr. Yves Mauchle led the cross-border Baker McKenzie team together with Local Principal Liew Ying Yi (Singapore) and Local Partner Masato Honma (Japan). The team further comprised Senior Associate Darren Yang in Singapore, Local Partner Akiko Hosokawa and Associate Lene Someno in Tokyo and Associates Bettina Klein and Sammy Guidoum in Zurich.

Principal Stephanie Magnus commented, “We are truly honored to be part of this monumental transaction, the first-of-its-kind for the financial industry. The successful live pilot demonstrates that the execution of real-time global digital assets transactions is now a reality, paving the way for the global banking and asset management industries to harness the vast potential of asset tokenization. We are grateful for DBS Bank, UBS AG and SBI for placing their trust in our team in navigating the regulatory intricacies around a real-time transaction across multiple jurisdictions.”

Partner Dr. Yves Mauchle added, “We are excited to be part of such an innovative transaction where Swiss ledger-based securities have been used as a positive legal framework for the cross-border tokenization of securities and means of payments. Furthermore, this is a cutting-edge blockchain transaction between three large financial institutions in three fundamentally different jurisdictions across the globe. All this marks a real highlight for our work.”

In December 2022, Baker McKenzie advised UBS AG on a transnational digital securities issuance using the distributed ledger technology (DLT). The USD 50,000,000 fixed rate digital securities were placed in Singapore and Hong Kong and issued and settled on 15 December 2022. The transaction represents one of the first transnational issuances of DLT-based securities by a financial institution and is part of the ongoing digital transformation of the capital markets landscape.

About Baker McKenzie

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