Swiss bank UBS launches digital bond for blockchain and traditional exchanges

    05 Nov 2022

    Swiss investment bank UBS AG introduced its digital bond, claiming to be the world’s first publicly traded bond settled on both blockchain-based and traditional exchanges. The bond will be issued on the blockchain platform of SIX Digital Exchange (SDX), not requiring a central clearing counterparty. Issuing the blockchain-based bond will probably encourage more banks to follow.

    On November 3, Swiss investment bank UBS AG introduced a new digital bond. The bank said that it is the first-ever bond to be publicly traded and settled on both – traditional exchanges as well as blockchain-based exchanges.

    The digital bond comes with the same legal status, rating, and investment structure as a traditional senior unsecured note. It is a 375 million Swiss franc-denominated three-year bond with a 2.33% coupon.

    This digital-only bond will be issued on the blockchain-based platform of SIX Digital Exchange (SDX). Similar to SDX, the digital bond will also be issued on the SIX Swiss Exchange.

    Whether the investors have a blockchain infrastructure or not, UBS will allow investors to invest in this digital bond. This will help to issue bonds in a simpler, more efficient, and faster manner. 

    “We are proud to leverage distributed ledger technology to launch the inaugural UBS digital bond. This shows our commitment to support the development of new financial market infrastructure. UBS is committed to using technology not just as an enabler, but to making it a true differentiator for UBS,” Beatriz Martin, UBS Group Treasurer, said in a statement.

    The digital bond will achieve settlement through the SIX Digital Exchange (SDX) distributed ledger-based central securities depository (CSD) network by leveraging the atomic settlement technology. This settlement will be instant and automatic and won’t require any central clearing counterparty. Investors also can automatically settle and clear the UBS digital bond on either SDX CSD directly or on SIX SIS.

    The UBS move into the crypto space followed comments from the company’s CEO last year classifying crypto as an “untested asset category” and urging caution from investors during the bull market. Issuing a blockchain-based digital bond, however, is a welcome development and will encourage more banks to follow.

    Last month, another major traditional financial institution in Europe, Société Générale, was granted approval as a digital asset provider (DASP), allowing the French bank to provide digital assets custody and trading through a subsidiary. The bank joined other international DASP operators such as Bitpanda, Binance, and eToro.

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