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FINMA green lights blockchain euro bonds, digital euro on SIX Digital Exchange

sdx digital euro bonds tokenization

Today the SIX Digital Exchange (SDX) confirmed it received regulatory clearance from Swiss regulator FINMA to issue euro-denominated bonds. This includes their trading and atomic settlement using a tokenized digital euro. To date, SDX issued blockchain-based bonds have been in Swiss francs.

The SIX Group also operates the Swiss interbank payment network SIC. Hence the central securities depositary SDX-CSD is integrated with euroSIC to enable the tokenization of euros (tEUR) and the reverse process where the tokens are converted back to fiat currency. This solution is available to members of the SDX-CSD. Members include Credit Suisse, UBS, Zürcher Kantonalbank, Berner Kantonalbank and CM-Equity.

The EUR-denominated bonds would still be under Swiss law. 

“With this step, SDX once again underscores its pioneer status in the digital asset space,” said David Newns, Head SDX. “We are harnessing distributed ledger technology for future service offerings which are now attractive and applicable to the EUR market.”

SDX launched in November 2021 as the first fully regulated digital exchange and CSD. At the time, we noted that it was looking to tokenize euros for wholesale use but in Germany through its Frankfurt-based Swiss Euro Clearing Bank (SECB), a SIX subsidiary. However, it’s gone for the euroSIC route first. SDX has also participated in central bank digital currency (CBDC) experiments with the central banks of Switzerland and France.

In November 2022, UBS used SDX for a substantial CHF375 million ($406m) bond issuance. The UBS issuance marks a breakthrough not just for SDX but for tokenization generally. 

That’s because it used an integration between the SDX-CSD and the conventional SIX CSD. So while the entire issuance is based on DLT, the securities can be held conventionally at the main SIX CSD, meaning investors require no technology adaptation. This makes digital issuances viable while the adoption of the technology continues to spread.

Earlier this month, the City of Lugano issued a CHF 100 million ($108m) bond on the exchange.

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