Largest Swiss Bank UBS Tests Its Product on Ethereum's L2 ZkSync

UBS, a Swiss-based banking and asset managing conglomerate, is experimenting with rolling out Key4 Gold program on zkSync Validium testnet. In a bold move, UBS is setting new standards in RWAs tokenization on Ethereum-like blockchains.

UBS tests its Key4 Gold program pilot on zkSync rollup

According to an announcement by zkSync, an Ethereum-based L2 scaling network, UBS, Switzerland’s largest bank, is rolling out its digital gold investment vehicle’s proof of concept on zkSync testnet. Tokenization program UBS Key4 Gold is set to streamline fractionalized investments in the precious metal.

The new proof of concept was designed to demonstrate all core functions of the potential investing mechanism: Gold token issuance, transaction processing, reconciliation and so on.

In a proof of concept, UBS deployed smart contracts on a ZKsync Validium testnet. The network was chosen thanks to its enhanced privacy, resource-effective scalability and interoperability. The current version of UBS Key 4 Gold is running on UBS Gold Network, the company’s permissioned blockchain ecosystem of vaults, liquidity providers and distributors.

Alex Gluchowski of Matter Labs, zkSync co-inventor, is optimistic about the opportunities the new concept unlocks for the tokenization scene on high-performance EVM blockchains:

This PoC reflects UBS’ continued efforts to explore how blockchain can enhance its financial offerings and support its broader digital asset strategy. I firmly believe that the future of finance will take place onchain and ZK technology will be the catalyst for growth. This PoC is a testament to the fact that ZKsync is the ideal home for tokenized assets, building Web3 without compromise. We’re excited to play an integral role in the continued evolution of the space

The protocol leveraged zkSync Validium, an L2 network with off-chain data storage.

Better instruments for securities tokenization in Web3

Christoph Puhr, Digital Assets Lead for UBS Group, is excited by the prospects of the collaboration with Matter Labs on PoC and further ZK-powered use cases:

This is another great example of how UBS collaborates with technology providers to stay at the forefront of innovation. Whilst tokenized securities hold a lot of potential to bring new solutions to our clients, scalability, privacy, and interoperability remain key challenges to overcome. Our PoC with ZKsync demonstrated that Layer 2 networks and ZK technology hold the potential to resolve these.

This is not the first UBS involvement with blockchain. As covered by U.Today previously, the banking giant is running a tokenized money market fund on the Ethereum (ETH) blockchain.

Also, in Q1, 2024, UBS purchased 3,600 shares of BlackRock’s iShares Bitcoin Trust (IBIT), one of the first ETFs on spot Bitcoin.