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SIBOS 2020: SIX Digital Exchange plans early 2021 launch, likely with a wholesale CBDC

digital asset trading

Earlier this week during the SIBOS banking event Tim Grant gave a progress update on the Swiss stock exchange’s SIX Digital Exchange (SDX). The Head of SDX said it will “hopefully” launch in Q1 of next year. It’s not entirely within SIX’s control because it hasn’t yet been granted a license by Swiss regulator FINMA. It needs one license to operate a digital asset exchange and another as a Central Securities Depositary (CSD) for digital assets. And Grant teased about the likelihood of the launch including a central bank digital currency, saying it’s the direction they’re heading.

At last year’s SIBOS, SDX launched a platform prototype, including digital security token issuance, live trading, and instant settlement.

Grant said the FINMA work was progressing well, as is the development of the technology platform. He outlined SDX’s vision to create a global liquidity pool for this new digital asset class, emphasizing that the focus was not just on Switzerland or Spain after SIX recently acquired BME. But he managed expectations, saying it will take years after launch to fully make the vision a reality.

The SDX leader joined SIX seven months ago from DrumG, a digital asset startup he founded. Previously he was at R3, and SDX uses the Corda enterprise blockchain.

Grant noted that institutions are supportive of central bank digital currencies and digital assets. “What’s been missing is that ignition point, which is a truly institutional regulated exchange and CSD,” said Grant. “And that’s precisely how we plan to ignite the market. As we come to market next year, we will be that first trusted, secure, regulated venue to come and start building liquidity.”

To enable instant settlement or delivery versus payment, onchain cash is needed. That could either be a stablecoin or a central bank digital currency (CBDC). As previously reported, SDX trialed a wholesale central bank digital currency (CBDC) with the Swiss National Bank (SNB). SIX has the advantage that it operates the SECOM payment rail for the central bank, which means it can do the technical development work itself. The combination of that position, the need for on-chain cash, as well as being the country’s stock exchange, means SIX might bring a wholesale CBDC to fruition.

However, three months ago, a central bank executive emphasized that the SDX – CBDC integration was a proof of concept. And he outlined an alternative to a CBDC was to integrate the SDX distributed ledger (DLT) directly with the real time gross settlement system (RTGS). That’s also a step that SIX can do itself.

Back to SIBOS: “The holy grail for everyone, the central banks, as well as the institutions and the FMIs (financial market infrastructures) like us is actual wholesale issuance of central bank digital currency,” said Grant. “So a central bank finally making that big step forward, making that leap and getting the policy changed. And that’s exactly the direction we’re heading with the SNB. Tremendous partnership, shown some really excellent results so far.”

“What is the roadmap to actual wholesale CBDC issuance?” continued Grant. “We’re hoping to be really on the front edge of that for the industry.”