UBS launches dual digital bond with blockchain settlement

Blockchains will create the next generation of financial instruments with its decentralized and P2P based model. While traditional banks are gearing up to embrace blockchains, the Swiss bank UBS AG has launched what it says is the world’s first digital bond. The issued bond has a tenure of three years, and carries a 2.33% return.

UBS AG has launched a bond scheme that can be settled both on a traditional exchange and on the blockchain. The bond can be settled on the distributed ledger of SIX Swiss Exchange (SIX SIS) or the central depository of SDX Digital Trading. Thus there is no need for a central clearing agency in this case. The digital settlement option does not alter the legal status or nature of the bond as a senior unsecured note, according to a media report.

The settlement process will utilize the atomic settlement technology, where two assets are exchanged and settled simultaneously with each other, rather than in the conventional T+2 days format. There are financial services that offer settlement of securities which are kept securely only at once place for their lifetime.

A statement from UBS AG said that they believe blockchain will make the entire process of issuing of bonds faster and more efficient.

Digital Asset Providers or DASP are the latest to emerge following adoption of blockchain in France and elsewhere. For instance, Société Générale of France has received DASP permission to offer trading and custody of digital assets through a subsidiary. Some other DASP entities from the crypto space are Binance, eToro, and BitPanda.

For instance, BitPanda is a white-label service provider, allowing users to set up their own fractional trading product with compliance, and is registered in Austria, France, Spain and Italy. eToro is an Israeli online crypto trading exchange with focus on sharing and communities.

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