Switzerland’s largest bank, UBS, has completed a proof-of-concept (PoC) using ZKsync Validium, an Ethereum layer-2 (L2) solution, to enhance its fractional gold investment product, UBS Key4 Gold. Notably, the pilot aims to address scalability, privacy, and interoperability challenges in digital gold trading.
Swiss UBS: Enhancing Scalability and Security
The PoC was conducted on a ZKsync Validium testnet to simulate the UBS Gold Network, a permissioned blockchain linking vaults, liquidity providers, and distributors. Through this trial, UBS successfully replicated key functions such as gold token issuance, transaction processing, and reconciliation.
Christoph Puhr, Digital Assets Lead for UBS Group, emphasized the importance of blockchain innovation in the financial sector in the announcement on X.
“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.”
Key Features of UBS Key4 Gold on ZKsync
UBS Key4 Gold allows retail investors to buy fractional amounts of gold with features including real-time pricing, deep liquidity, secure storage, and optional physical delivery. By integrating ZKsync Validium, the PoC demonstrated several improvements:
- Privacy: Users could only access their activity while maintaining verifiability through Ethereum’s L1 bridge smart contract.
- Interoperability: Stablecoins bridged from Ethereum were used to purchase gold tokens.
- Scalability: Off-chain data storage reduced costs and improved transaction throughput.
Alex Gluchowski, co-inventor of ZKsync, highlighted the broader implications of the technology. “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.”
Broader Implications for UBS and ZKsync
This blockchain-based pilot follows UBS’s previous blockchain initiatives, including the launch of a tokenized fund on Ethereum in November 2024. The bank continues to explore ways blockchain can integrate with traditional financial structures.
Meanwhile, ZKsync is pushing toward its 2025 roadmap goals, aiming for transaction speeds of 10,000 transactions per second (TPS) and near-zero fees. The zero-knowledge proof technology (ZK-proofs) underpinning ZKsync aims to improve Ethereum’s scalability, security, and privacy.
As UBS evaluates the results of its PoC, the adoption of blockchain in traditional banking could further accelerate, particularly in tokenized assets and digital securities
