UBS issues blockchain-based bond on SIX Digital Exchange – Ledger Insights
Today UBS announced its first digital bond, a CHF 375 million ($370m), 2.33% three-year unsecured bond that is entirely digital and issued on the SIX Digital Exchange (SDX) blockchain platform. However, it has a dual listing on both the main SIX exchange and SDX.
UBS is the first commercial bank to issue a digital bond that is listed, traded and settled on a regulated digital exchange. The bank is a member of the SDX alongside three other bank members Credit Suisse, Zürcher Kantonalbank and Berner Kantonalbank.
The promise of digital bonds is a more efficient issuance process, which should cut costs making smaller issuances viable. From an investor perspective, smaller minimum investments are possible, broadening access to a wider range of bondholders. The lifecycle of a digital bond is also easier to manage, with the ability to automate events such as coupon payments. Additionally, for secondary trading, the back office processes are streamlined because of a shared ledger that eliminates the need for reconciliations.
FINMA regulates SDX Trading as an exchange and SIX Digital Exchange is a central securities depository (CSD).
A key aspect of this bond issuance is the ability for the bond to be traded whether or not the investor has blockchain access. Last month, SDX integrated its SDX CSD and SIX SIS, the conventional custodian of the SIX main exchange. This means that an investor can choose the CSD. Settlement using the SDX CSD is instant and does not require a central counterparty.
“We are proud to leverage distributed ledger technology to launch the inaugural UBS digital bond,” said UBS Group Treasurer, Beatriz Martin. “UBS is committed to using technology not just as an enabler, but to making it a true differentiator for UBS.”
SDX is one of the first regulated digital exchanges, but this is by no means the first digital bond. Many of the high profile ones have been issued by governments or government-linked organizations such as the World Bank, the European Investment Bank and the Inter-American Development Bank. Societe Generale and Santander have both issued bonds on public blockchains. SDX uses the Corda enterprise blockchain.
Meanwhile, SDX went live a year ago, with the parent SIX Group issuing digital bond. While there have been other issuances, for private stocks and tokenized promissory notes, there hasn’t been any high profile securities issuances, which was anticipated. SDX has also branched out into crypto, launching a custody solution and ethereum staking.