UBS today announced its first digital bond, a 375 million Swiss francs ($370 million) three-year unsecured bond at 2.33%, which is fully digital and is issued on the SIX Digital Exchange (SDX) blockchain platform. ). However, it has a dual listing on both the main exchange SIX and SDX.

UBS is the first commercial bank to issue a digital bond that is listed, traded and settled on a regulated market digital exchange. The bank is a member of SDX along with three other members of Credit Suisse bank, Zürcher Kantonalbank and Berner Kantonalbank.

The promise of digital bonds is a more efficient issuance process, which should reduce costs and make smaller issuances viable. From an investor perspective, smaller minimum investments are possible, expanding access to a broader 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, administrative processes are simplified due to 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 issue is the ability to trade the bond, whether or not the investor has access to the blockchain. Last month, SDX integrated its SDX CSD and SIX SIS, the conventional custodian of the main exchange SIX. This means that an investor can choose the CSD. Settlement via SDX CSD is instant and does not require a central counterparty.

“We are proud to leverage distributed ledger technology to launch UBS’s inaugural digital bond,” said UBS Group Treasurer Beatriz Martin. “UBS is committed to using technology not only as an enabler, but also to make it a true differentiator for UBS.”

SDX is one of the first regulated digital exchanges, but it is by no means the first digital bond. Many of the high-profile ones have been issued by governments or organizations linked to governments such as the World Bank, the European Investment Bank and the Inter-American Development Bank. Société Générale and Santander have issued bonds on public blockchains. SDX uses the Corda enterprise blockchain.

Meanwhile, SDX went live a year ago, with parent company SIX Group issuing digital bonds. While there have been other issuances, for private equity and tokenized notes, there have been no high-profile security issuances, as anticipated. SDX has also branched out into crypto, launching an ethereum staking and custody solution.