DigiFT(As authorized distributor of UBS uMINT) Proposal To Ethena
Disclaimer:
All information provided within this proposal is intended for use by Ethena only and is not intended for public use outside of Ethena’s network purposes. Information provided is for information purposes only.
DigiFT and/or its subsidiaries endeavour to ensure the accuracy and reliability of the information provided, but do not guarantee its accuracy and reliability and accept no liability (whether in tort or contract or otherwise) for any loss or damage arising from any inaccuracy or omission or from any decision, action or non-action based on or in reliance upon information contained in this website. All information contained in this website is FOR ETHENA USED ONLY.
Name:
DigiFT (Tech) Singapore Pte.Ltd., as an authorized distributor of “UBS Money Market Investment Fund” (“uMINT”), and on behalf of UBS Asset Management.
Key Information
About UBS
UBS is a leading and truly global wealth manager and the leading universal bank in Switzerland. It also provides diversified asset management solutions and focused investment banking capabilities. With the acquisition of Credit Suisse, UBS manages 5.7 trillion dollars of invested assets as per fourth quarter 2023. UBS helps clients achieve their financial goals through personalized advice, solutions and products. Headquartered in Zurich, Switzerland, the firm is operating in more than 50 markets around the globe. UBS Group shares are listed on the SIX Swiss Exchange and the New York Stock Exchange (NYSE).
About UBS Tokenize
UBS has been expanding its digital asset capabilities offering through UBS Tokenize, its in-house tokenization service, which seeks to open the door to the world of decentralized finance reduce barriers and provide access to products and services to a broader range of market participants, bringing them closer together. UBS Tokenize supports opportunities throughout the whole asset lifecycle including origination, issuance, distribution, and custody - initially focusing on tokenization of bonds, funds, and structured products.
About DigiFT
DigiFT is a regulated exchange for on-chain real-world assets. A global outfit backed by well-established venture partners, DigiFT provides financial services for primary market origination and distribution as well as secondary market trading of asset-backed tokens. The assets backing these tokens include digital assets and real-world assets like bonds, equities, and units in collective investment schemes. DigiFT’s exchange provides liquidity through various channels, including the innovative Automated Market Maker (AMM) trading mechanism.
About uMINT
The “UBS Money Market Investment Fund” (“uMINT”) is a Singapore domiciled Variable Capital Company (“VCC”) which was incorporated with limited liability in Singapore. The VCC is a Singapore corporate fund structure constituted under the Variable Capital Companies Act 2018 of Singapore (“VCC Act”) and the VCC framework is administered by the Accounting and Corporate Regulatory Authority (“ACRA”). The VCC is used as an umbrella fund vehicle for the constitution of one of the sub-funds of the VCC with its participating shares (the “Shares”) tokenized.
The Fund is neither regulated nor supervised by the Monetary Authority of Singapore (the “MAS”). However, the investment manager appointed to manage the Fund is a holder of a capital markets services license for fund management and dealing in capital markets products pursuant to the Securities and Futures Act 2001 of Singapore and is regulated by the MAS.
DigiFT is currently exploring multiple use-cases in the B2B DeFi scene and is currently communicating with institutions with top-tier solutions.
Expected APY
Indicative net APR ~4.36% as of December 19th, 2024
Underlying asset(s)
The Fund invests all or substantially all of its assets in UBS (Irl) Select Money Market Fund - USD (the “Underlying Fund”), which is a Short-term Money Market Fund, as defined in the European Securities and Markets Authority’s Guidelines of 19 May 2010 on a Common Definition of European Money Market Funds. The Underlying Fund invests in high quality, short-term, USD denominated debt securities of US and non-US governmental as well as other issuers.
The Underlying Fund has money market fund rating of Aaa-mf from Moody’s and AAAmmf from Fitch.
Source: Standard DDQ - UBS (SG) Global Opportunities VCC - UBS Money Market (USD)
For more in-depth information with regards to the underlying asset and/or product features, please email ryan.chen@digift.com.sg
Minimum/Maximum transaction size
Minimum: 1,000 USD /USDC
Maximum: N.A.
Current AUM for asset
The AUM of the underlying fund of uMINT is USD8.55 billion as of 30 Sep 2024.
Volume metrics
N/A
Proposal Summary
Brief outline of the requested allocation of Ethena’s Reserve Fund to your asset/product and benefit to Ethena.
Basics and background
How will this allocation improve the diversification or capital efficiency of Ethena’s Reserve Fund and/or backing assets?
Adding Stability and Credibility to the Stablecoin Reserve:
The Fund lowers the counterparty risk for Ethena. With an established presence across the world, UBS AM has been a dependable partner globally for over 150 years. UBS AM brings exacting standards, robust investment processes and a true focus on high-quality client service delivery, all underpinned by the safety and security of the broader UBS group.
Diversification of Assets:
DigiFT is grateful for the opportunity to provide Ethena the opportunity to diversify its holdings across both asset class and managers. Digital assets have developed substantially over the last ~10 years and have further room to mature. Diversified allocation to lower volatility assets is critical to ensure long term success. Our long-term investment and risk management experience in developed investment markets (TradFi) guides this core principle. We believe the Fund offers an unique opportunity for Ethena to benefit from UBS AM’s experience and institutional approach in money market investment, and even brings diversified opportunities between tradifi and web3.
Capital Efficiency and Best Execution:
UBS AM operates a global research platform shared by all of the firm’s research analysts located in the main financial centres around the world. We employ a team of 30+ credit research analysts divided into industry and regional coverage.
Money market portfolio managers are responsible for the investment strategy, construction and trade execution of the portfolios. At any one time we have around 80 bond dealing relationships with other finance houses that have been carefully vetted by our approval process. We execute deals over the phone directly with our counterparties or electronically using multi-bank platforms.
For money market funds we can currently use Tradeweb, Bloomberg and Market Axess for appropriate trades where they offer better and quicker execution than that available over the telephone. Depending on currency some might be more used /preferred than others. We continue to use the telephone, typically for larger and more complex deals or packages of deals and also for markets the electronic systems do not cover. In accordance with recent regulatory initiatives, UBS has joined other counterparties in signing up to the electronic novation process whereby novated trades are loaded directly to the Depository Trust & Clearing Corporation (DTCC). This negates the need for email acceptance, resulting in a more efficient process and reducing any inherent risks around novations.
Additionally, we have around 10 counterparties set-up for regular CP/CD activities.
Institutional Risk Management:
The Underlying Strategy may not invest more than 10% of the net assets in securities of the same issuer. Furthermore, securities of issuers singly accounting for more than 5% of the Underlying Fund’s assets must when aggregated together not account for more than 40% of the Underlying Fund’s assets. The Underlying Fund may neither hold fixed-rate debt securities having a residual maturity of more than 12 months, nor hold variable-rate debt securities with a residual maturity exceeding 12 months and not having an adjustment of the interest rates to the market conditions at least once a year. Issues falling short of the defined quality criteria (downgraded) are to be sold within a period of 3 months with due consideration given to the general market conditions, unless a different course of action is recommended by the UBS AM Credit Research Team.
Risk control is an important aspect for the asset management business particularly to prevent liability and reputation damage. The highest standards of risk identification, risk management, and risk control are indispensable to the success, reputation, and continuing strength of the business group, and its management and staff is thus committed to developing and applying best market practice to all risk activities. Risk management within UBS AM is based on the fundamentals of strong internal controls, which includes adequate segregation of responsibilities. Risk management and control within UBS AM is performed by Investment Management & Research as well as all business areas, portfolio guidelines are independently monitored. An empowered risk control function within the business group of UBS Corporate Center, which is closely coordinating with the Group Chief Risk Officer is responsible for identifying, assessing, monitoring and reporting the investment risks pertaining to the UCITS funds based in Luxembourg and funds under similar regulations based in Switzerland.
For further information, please revert to the Private Placement Memorandum (PPM), provided directly to Ethena’s consideration as a potential eligible accredited investor. DigiFT will be willing to provide additional information related to this via private communication.
Multiple liquidity solutions:
Ethena will be able to experience instant liquidity solution as well as P2P and OTC facility on DigiFT’s platform, offering Ethena access the ability to liquidity 24/7. DigiFT is currently working with market makers to further expand the liquidity of uMINT.
Strategic Collaborations:
As the distributor, DigiFT can offer other UBS AM solutions across major traditional and alternative asset classes – from active to passive including a comprehensive sustainable investing offering to diversify Ethena’s collateral base, adding high quality reserve assets to the portfolio.
Secondly, DigiFT, as a regulated channel for DeFi and Web3, can connect DeFi protocols with mainstream finance. For example, we can structure sUSDe as a security to allow family office/fund get access to sUSDe in a regulatory compliant manner. DigiFT can also list USDe as a trading currency (listed pair) against securities such as the Fund on DigiFT Exchange, adding a critical use case for Ethena’s USDe.
Please describe any experience your firm has in working with decentralized organizational structures
UBS AM and DigiFT are strategic partners to bring RWA securities to Web3, making blockchain driven finance a reality, providing critical infrastructure for value exchange across new and mature investment ecosystems.
UBS Asset Management:
The Fund Token smart contract was developed and deployed by UBS in-house tokenization service, UBS Tokenize, as part of Project Guardian, a collaborative industry initiative led by the Monetary Authority of Singapore (MAS). It was designed to bring various “real world assets" on-chain and is a core part of UBS Asset Management’s global distributed ledger technology corporate strategy, focused on leveraging public and private blockchains networks for enhanced fund issuance and distribution. It also forms part of the broader expansion of UBS’s tokenization services through UBS Tokenize.
In November 2022, UBS launched the world’s first digital bond that is publicly traded. In December 2022, UBS issued a USD 50 million tokenized fixed rate note, and in June 2023 originated CNH 200 million of fully digital structured notes for a 3rd party issuer.
Source: UBS
DigiFT:
DigiFT is the first and only RWA exchange on Ethereum public blockchain with a Capital Market Services (CMS) License and is approved as a Recognized Market (RMO) Operator by MAS. With these licenses, DigiFT is approved to offer:
- Primary market issuance and broker-dealer services
- Secondary marketplace ‘wallet to wallet’ order-matching (via AMM, OTC or P2P), transfer agent and settlement services
- Accept fiat, stablecoins and cryptocurrencies for trading of RWA tokens
DigiFT has been successfully granted authorisation to deploy a hybrid approach that combines DeFi technology and processes, offering decentralised ‘wallet to wallet’ RWA trading, while successfully configuring public chain permission standards (ERC-20) to meet the highest regulatory and compliance standards, acceptable to both UBS and the Singapore MAS. This well vetted combined approach allows DigiFT to confidently provide the required “Trust Anchor” bridge when delivering sustainable yield and value transfer between both DeFI and TradFI industries.
DigiFT has successfully listed over 12 tokens in the past 24 months, including a corporate debt note by Diners Club, single U.S. T-Bills, high-yield bank bonds and money market fund. As an on-chain exchange, DigiFT’s team also have experience working with DeFi protocols and decentralized organizations, such as payment channels, lending protocols and CeDeFi protocols.
What is your entity’s current assets under management, assets held in trust, total value locked, or equivalent metric for your legal structuring?
UBS AM is one of the largest global asset managers. With the acquisition of Credit Suisse, UBS manages 5.7 trillion dollars of invested assets as per fourth quarter 2023.
Legal design
Do holders of your product have any shareholder, investor, creditor or similar rights?
While the Tokens are not in and of themselves an electronic representation of the Shares, tokenholders are generally regarded as shareholders of Shares of the Fund (the “Shareholders”) and will receive the distributable proceeds, income and profits earned by such Fund from holding or disposal of investments and any surplus assets available for distribution to the holders of Shares in the event of liquidation in accordance with the constitution of the VCC (the “Constitution”).
The Shareholders shall (in respect of the Share) not have the right to: (a) vote as a member at any general meeting of the Fund, except on a variation of rights as described in the private placement memorandum of the Fund; and (b) receive notice of, attend and speak at any general meeting of the Fund.
The Shareholders shall have the right, in accordance with the VCC Act, to receive a copy of the financial statements (or consolidated financial statements and balance sheet, as the case may be) of the Fund.
The Shares are redeemable at the option of the VCC in accordance with the Constitution and the Shares are generally also redeemable at the option of the Shareholders in accordance with the Constitution
Source: UBS AM Tokenized VCC Digital Features Overview
For further information, please revert to the Private Placement Memorandum (PPM), provided directly to Ethena’s consideration as a potential eligible accredited investor.
Describe the legal and contractual structuring for your product, specifically naming any regulatory bodies overseeing the product, if applicable.
The VCC is a Singapore corporate fund structure constituted under the Variable Capital Companies Act 2018 of Singapore (“VCC Act”) and the VCC framework is administered by the Accounting and Corporate Regulatory Authority (“ACRA”).
The Fund is neither regulated nor supervised by the Monetary Authority of Singapore (the “MAS”). However, the investment manager appointed to manage the Fund is a holder of a capital markets services license for fund management and dealing in capital markets products pursuant to the Securities and Futures Act 2001 of Singapore and is regulated by the MAS.
For further information, please revert to the Private Placement Memorandum (PPM), provided directly to Ethena’s consideration as a potential eligible accredited investor. DigiFT will be willing to provide additional information related to this via private communication .
How would the proposed allocation be treated in a bankruptcy or insolvency situation?
The holdings in the Fund are bankruptcy remote as the Fund’s assets are held in trust at the Fund’s custodian which is a Global Tier 1 GSIB custodian bank.
Each sub-fund of the VCC is a separate collective investment scheme with its own investment objective and strategy and overseen by the Manager.
As a matter of Singapore law, under Section 29 of the VCC Act: (a) the assets of a particular fund shall not be used to discharge any Fund Liability of any other Fund or Fund Liabilities, including in the winding up of such other fund or the VCC; and (b) fund liabilities of a particular fund shall only be discharged solely out of the assets of such Fund, including in the winding up of such fund. However, there is a risk that the bankruptcy remoteness of the Fund pursuant to Section 29 of the VCC Act may not be applied in legal or other proceedings before a court or other tribunal of a country other than Singapore. The VCC will establish a separate account for each fund and each class of Shares comprised in each fund.
Smart Contract/Architecture
How many smart contract audits have been completed with respect to your tokenized product? Please name the auditors and provide a copy of reports.
DigiFT’s smart contract have undergone ten audits. Auditors include Hacken, Slowmist, Numen and others.
Is the asset/product permissioned? If so, how are you managing user identities? Any blacklisting/whitelisting features?
The Fund Token contract is deployed on Ethereum and has whitelisting capability. Various roles are designed to provide governance on different functions, including minter, burner, whitelist approver etc. The token holder needs to be whitelisted before holding or transferring the token.
Is the asset/product present on several chains? Are there any cross chain interactions?
The Fund is deployed on Ethereum. We may consider deployment on other blockchains.
Are the applicable tokens being used in any other protocols? Please describe the various components of the ecosystem.
Ethena Lab will be the first protocol that the Fund is made available to, with the aim to extend the use cases with other suitable protocols.
How are trusted roles/admins managed in the system? Which aspects of the solution require trust from users?
The Fund Token contract is deployed on Ethereum and has whitelisting capability.
Various roles are designed to provide governance on different functions, including minter, burner, whitelist approver etc. The token holder needs to be whitelisted before holding or transferring the token.
Is there any custom logic required for your token/product? If so please give any details.
The token holder needs to be whitelisted before holding or transferring the token.
The token is ERC-20 compatible, with whitelist/ blacklist and force transfer functions to ensure regulatory compliant. The token can be transferred to any whitelisted wallet, however, due to tax consideration, we do not recommend Ethena to transfer the token to other addresses that are under different UBO.
DigiFT is happy to address any specific questions related to smart contracts architecture.