Swiss banks issue first digital bonds using real CHF wholesale wCBDC on regulated DLT platform

Swiss banks, Cantons of Basel-City, and Zurich have successfully issued digital bonds using real CHF wholesale central bank digital currency (wCBDC) on SIX Digital Exchange (SDX). This marks the first-ever issuance of this kind, leveraging the Swiss National Bank’s (SNB) wCBDC.

The digital bonds issued by Basel-City (ISIN: CH1265890678) and Zurich (ISIN: CH1306117073) represent a bold step in the utilization of distributed ledger technology (DLT) in mainstream financial operations.

This move is a part of Project Helvetia Phase III, launched by the SNB on Nov. 2, 2023, aimed at facilitating pilot wCBDC transactions for financial institutions from Dec. 2023 until mid-2024. As part of this ambitious project, Basler Kantonalbank and Zürcher Kantonalbank served as the issuer agents for the cantons.

The use of DLT in this financial market infrastructure is a pivotal moment, as David Newns, Head of SIX Digital Exchange, notes. He said,

“The settlement of the first securities transactions in wCBDC in a developed economy on regulated blockchain-based infrastructure in a production environment represents a major milestone for the entire industry,”

SIX Digital Exchange, a fully regulated financial market infrastructure for digital assets, is licensed by Switzerland’s financial market regulator, FINMA, and operates both as a stock exchange and a central security depository.

The implications of this development extend beyond the Swiss financial markets. It highlights the potential for efficiency gains and increased transparency in global financial transactions. Moreover, it showcases the evolving role of tokenized, DLT-based financial markets infrastructure, possibly setting a new standard in the industry.

As emphasized by Thomas J. Jordan, Chairman of the Swiss National Bank’s Governing Board,

“With this pilot project, we are now, for the first time, making it possible to securely and efficiently settle transactions with tokenized assets on a regulated and productive DLT platform using real wholesale CBDC.”

It’s important to note that while all blockchains are a form of DLT, not all DLTs are blockchains. Blockchain is a specific type of DLT that uses cryptography to control new units, distinguished by its data structure being bundled into blocks and then chained together sequentially. However, DLT can also include other structures that don’t necessarily organize data into blocks or chain them.

The pilot highlights explicitly the use of DLT over blockchain, indicating that the Swiss financial sector is exploring a broader range of distributed ledger technologies beyond the traditional blockchain model.