This Swiss City Will Issue $113 Million Tokenized Bond Amid CBDC Trial

Swiss City St. Gallen will issue a $113 million three-year digital bond using the SIX Digital Exchange (SDX). The bond can be settled using Switzerland’s wholesale central bank digital currency (CBDC) or tokenized euros.

Swiss city St. Gallen joins the Canton of Zurich, the City of Basel, and Lugano in issuing tokenized bonds in an effort that is part of Switzerland’s CBDC trial.

SDX Targets Bonds for Smaller Firms

With a maturation period of three years, St. Gallen’s digital bonds can be settled using the Swiss Franc CBDC or tokenized euros. Like the bonds the other three regions issued, St. Gallen’s will be part of a trial to test CBDC transactions between institutions. The principal managers for the bond issuance are Kantonalbank, UBS, and J. Safra Sarasin.

A bond is a debt a company or government issues to borrow money from the investing public. Most bonds have maturation windows of three months and thirty years, after which the institution generally repays the money. Certain bond vehicles have a coupon, an interest payment that the lender can recoup regularly before the bond matures.

Tokenized bonds are simply bonds that issuers can settle on blockchain infrastructure. A company such as SDX converts the bond into an ownership certificate that a blockchain can understand. This company can then manage its issuance and settlement using distributed ledger technology, which is a non-trivial task, according to researchers at the Universitat Politècnica de València in Spain.

“Designing a tokenized platform involves several critical factors, including scalability, security, and user experience. Scalability is vital as the platform should be able to handle a vast number of transactions without experiencing performance issues. High-performance computing infrastructure, such as cloud computing services and efficient consensus alg

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Author: David Thomas

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