Welcome to the February edition of our monthly State of Tokenization, where we unravel the latest developments shaping the financial landscape. This month’s highlights include: The Tokenise Europe 2025 initiative, co-founded by the European Commission and the German Banking Association, which aims to position Europe as a leader in tokenization. Simultaneously, Bitcoin ETFs have rapidly amassed $10 billion in assets, signaling a growing interest in cryptocurrency investments. UBS and Citi contribute to this evolution by launching Hong Kong’s first investment-grade tokenized warrant and exploring smart contract capabilities for tokenizing private funds, offering a glimpse into a future where tokenization drives financial innovation.
The Tokenise Europe 2025 initiative was co-founded by the European Commission and the German Banking Association, with the support of the consultancy Roland Berger and more than 20 member organizations from different countries and industries. Its goal is to promote the tokenization of Europe. The initiative emphasizes the importance of a tokenized economy for Europe in global competition and highlights the need to understand how this new technology can create potential for new services and business models across Europe. The report produced by this initiative underscores that tokenization will be a key factor in making the EU more competitive and resilient in the coming years. By transforming supply chains, trade finance, logistics, and public services into seamless and efficient processes, introducing a token economy to financial markets can lead to greater efficiency, increased security, and trust while reducing complexity. [1]
The recently launched spot Bitcoin exchange-traded funds (ETFs) have completed their first trading sessions, achieving a significant milestone of $10 billion in assets under management (AUM). This occurred just one month after their approval. According to data from BitMEX Research, net flows for the nine ETFs reached $2.7 billion on January 9. The leading ETF in terms of AUM is BlackRock’s iShares Bitcoin Trust, currently holding Bitcoin (BTC) worth $4 billion. Fidelity’s Wise Origin Bitcoin Fund follows closely with over $3.4 billion in BTC under management. Additionally, the ARK 21Shares Bitcoin ETF has also crossed the billion-dollar mark, holding approximately $1 billion worth in its portfolio. [2]
Neutral, a technology company building market infrastructure for environmental assets, and DLT Finance, a BaFin-licensed trading and brokerage firm, have joined forces to launch the first regulated trading platform for tokenized environmental assets. This platform includes carbon and renewable energy credits. Operating out of Germany, Neutral combines its technical infrastructure with DLT Finance’s regulated services to enable this launch.
The Neutral trading platform is specifically designed for the intricacies of environmental asset markets. It provides essential supportive services to facilitate efficient interaction and trade. Users can instantly execute buy and sell orders using standardized trading instruments. Additionally, they can select specific assets for redemption or deposit, transfer credits back to their registry accounts, or retire them directly on the platform. [3]
On February 7, 2024, UBS AG announced the launch of Hong Kong’s first-ever investment-grade tokenized warrant on the Ethereum public blockchain network. This product utilizes the on-chain issuance product framework offered by UBS Tokenize, the bank’s in-house tokenization service. The warrant is a call warrant with Xiaomi Corporation as the underlying stock. Notably, it is also the first natively issued warrant on a public blockchain, and it was sold to OSL Digital Securities Limited, a licensed virtual asset platform operator and wholly-owned subsidiary of OSL Group (formerly BC Technology Group).
This tokenized warrant represents UBS’s ongoing effort to develop its tokenization services further. Since 2015, UBS has been exploring various opportunities to develop institutional-grade infrastructure for tokenized assets.
Patrick Pan, Chairman and Chief Executive Officer at OSL Group, emphasized the significance of this investment-grade tokenized financial product issuance in Hong Kong’s regulated virtual asset landscape. It marks a major milestone, demonstrating the potential of blockchain technology in transforming financial markets. [4]
On February 14, 2024, Citi, in collaboration with Wellington Management and WisdomTree, successfully completed a proof of concept on the tokenization of private funds. This initiative was conducted on the Avalanche Spruce institutional test Subnet. The results demonstrated that smart-contract capabilities could introduce new functionalities and operational efficiencies that are currently unavailable with traditional assets.
In the proof of concept, Wellington Management issued a private equity fund, which was then tokenized on a distributed ledger technology (DLT) network. The underlying fund distribution rules were encoded into a smart contract, embedded in the token, and transferred to hypothetical WisdomTree clients. This demonstration highlighted how smart contracts could enhance automation, potentially creating an improved compliance and control environment for issuers, distributors, and investors.
As part of the experiment, Citi evaluated various scenarios involving transfers using smart contracts, simulated identity credentials issued by WisdomTree, and collateralizing a private fund token in an automated lending contract with DTCC Digital Assets (formerly Securrency). The goal was to explore how to support clients in issuing and accessing tokenized private assets in a controlled and scalable manner while ensuring interoperability with the traditional financial ecosystem. [5]
2 Bitcoin ETFs hit $10B milestone just one month after approval (cointelegraph.com)
4 Hong Kong’s first-ever tokenized warrant on the Ethereum network | UBS 全球议题
