UBS Pioneers Blockchain Gold: Secure, Fractional Purchases on Ethereum

UBS, a Swiss banking giant, has successfully conducted a trial of its blockchain-based gold investment product, UBS Key4 Gold, on the Ethereum Layer-2 network ZKSync. The test, which used ZKSync's Validium mode, enabled fractional gold purchases with secure and private transactions. This move underscores the growing adoption of blockchain technology by traditional financial institutions for asset tokenization.

On January 31, ZKSync confirmed that UBS, which manages $5.7 trillion in assets, is exploring blockchain to simplify gold investments. The test allowed Swiss customers to buy physical gold through a blockchain system that prioritizes security, efficiency, and privacy.

UBS Key4 Gold offers retail investors the ability to purchase fractional gold shares, benefiting from real-time pricing, strong liquidity, and secure storage. The platform runs on the UBS Gold Network, a permissionless blockchain that connects vaults, liquidity providers, and distributors.

To enhance efficiency, UBS used ZKSync's Validium mode, a zero-knowledge rollup that boosts scalability by keeping data off-chain. As part of the trial, the bank deployed smart contracts on the Validium testnet to simulate the UBS Gold Network. These contracts allowed gold token issuance and transaction processing while maintaining security.

The testnet also improved privacy, ensuring that participants could only see their own transactions while keeping verification systems intact. Additionally, it enabled stablecoin integration with Ethereum, making gold token purchases more affordable and scalable.

UBS' blockchain test is part of a growing trend among financial institutions exploring blockchain technology. The bank has previously experimented with tokenization, launching an Ethereum-based money market investment fund. UBS Digital Assets Lead Christoph Puhr emphasized that tokenized securities have enormous potential, but scalability, privacy, and interoperability remain challenges. He noted that ZKSync's proof-of-concept demonstrated how Layer-2 networks and zero-knowledge technology can help address these issues.

“This is another example of how UBS works with tech providers to stay at the cutting edge of innovation. Our test with ZKSync showed that Layer 2 networks and zero-knowledge technology could solve these challenges,” Puhr explained.

ZKSync co-inventor Alex Gluchowski reinforced this idea, stating that these initiatives prove that finance is moving on-chain. He believes zero-knowledge