Swiss City of Lugano Launches Blockchain Bond with Wholesale CBDC Settlement

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In Switzerland, the city of Lugano has announced the issuance of its second blockchain bond, following its initial blockchain bond launch a year prior. This recent issuance, valued at CHF 100 million, integrates with the Swiss National Bank’s (SNB) Project Helvetia, marking a significant step by settling transactions in wholesale central bank digital currency (CBDC). This move aligns Lugano with other Swiss cantons like Basel-Stadt and Zurich, which have previously issued digital bonds under this pilot program.

Project Helvetia, initiated by the SNB in November 2023, aims to explore the use of wholesale CBDC for settling bond transactions on the SIX Digital Exchange (SDX). The project’s phase three, starting in December and running until June 2024, shifts the wholesale CBDC operations from testing to live environments, with six banks facilitating the transactions.

Lugano, a major city in Italian-speaking southern Switzerland, is leveraging blockchain technology not only for bond issuance but also to promote private-sector investment and digital payment solutions. The city’s blockchain initiatives, including the ability for citizens and companies to pay municipal invoices with Bitcoin and Tether, underscore its commitment to becoming a hub of technological innovation and digital transformation.

The recent bond, with a ten-year duration and a 1.415% coupon, was issued in collaboration with leading banks and features dual listing on SDX and the traditional SIX Swiss Exchange. This approach reflects Lugano’s ambition to model innovation in the financial sector by adopting blockchain and digital currencies, further supported by its “Plan B” initiative to foster technological development.

Project Helvetia’s progression into its third phase demonstrates a significant exploration into how central bank digital currencies can facilitate the settlement of tokenized assets and securities in a decentralized trading environment. The involvement of multiple banks in this phase indicates a collective effort to test and implement these digital solutions in real-world financial operations.

Lugano’s forward-thinking strategies in blockchain bond issuance and digital payments position it as a pioneer in adopting new financial technologies, with the potential to set standards for digital bonds and CBDC settlements in the broader financial market. The city’s success in quickly placing its latest bond issuance underlines the efficiency and appeal of digital financial instruments, signalling a shift towards more widespread acceptance and use of blockchain and digital currencies in public sector finance.

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