The Cantonal Bank of Zurich (ZKB), in collaboration with UBS, has for the first time exchanged blockchain-based instructions for the subscription and redemption of fund shares on behalf of its clients. With this move, both Swiss banking giants aim to position themselves as pioneers in the field.
Specifically, ZKB transmitted orders for the subscription of UBS fund shares via the blockchain solution of FundsDLT, a subsidiary of Deutsche Börse AG, to UBS. In return, UBS provided ZKB with transaction progress and success information via the blockchain, according to a press release. According to its own website, FundsDLT operates on Quorum, a private "enterprise blockchain" with restricted access.
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Fund transactions via blockchain
Blockchain technology enables financial institutions to make their processes more efficient, according to ZKB. Unlike securities settlement, which has seen significant efficiency gains in recent years, there is still further potential for improvement in the fund sector. Consequently, the findings from this pilot project are highly relevant. Thanks to the use of distributed ledger technology (DLT), real-time data availability on the current status of fund orders is ensured. This, in turn, promotes greater transparency in fund transactions.
"The use of blockchain should enable our customers to process transactions even more efficiently in the future. Blockchain technology can add value in the long run. These transactions demonstrate our expertise in this area and mark another milestone in the adoption of forward-looking technologies, which ZKB continues to strengthen through participation in various initiatives." - Peter Hubli, Head of Digital Asset Solutions at the Cantonal Bank of Zurich
The press release further states that the Swiss financial center is taking on a pioneering role in technological advancements and that the potential applications of blockchain technology are becoming increasingly relevant in the financial sector. The latest transactions are just one of several initiatives through which ZKB is exploring the numerous applications of DLT technology. Among other things, the bank has supported multiple issuers in issuing digital bonds as part of the Swiss National Bank’s Helvetia III project. Notably, since September 2024, the Cantonal Bank of Zurich has also been offering its customers and third-party banks the trading and custody of selected cryptocurrencies.
UBS: Innovation or marketing?
UBS, ZKB’s business partner, has taken a somewhat different stance in the crypto sector. Over the years, the Swiss mega-bank has warned clients about the "worthlessness, volatility, and regulatory uncertainty" of Bitcoin. According to numerous anecdotes, accounts of customers with ties to the crypto industry have been frozen or closed. The bank even denies retail investors access to US-based Bitcoin and Ethereum ETFs.
At the same time, UBS wants to present itself as a blockchain pioneer. However, it is crucial to distinguish between public blockchains—such as Bitcoin and Ethereum—and private "DLT" systems. Public blockchains offer key advantages such as decentralization, transparency, and security through a distributed network of nodes, eliminating single points of failure. In contrast, private blockchains restrict access to a controlled group of participants and are operated by a central entity, entirely forfeiting the enhanced security, transparency, and trustworthiness that public blockchains provide. It appears that UBS has not fully grasped the fundamental benefits of blockchain technology. Neither UBS nor ZKB immediately responded to a request for comment from CVJ.CH on the matter.
