UBS AG will launch digital bonds that are settled on a blockchain, as well as on traditional exchanges.

Key points: 

• Swiss investment bank UBS AG launched the digital hybrid bond, which it claims is the world’s first publicly traded bond settled on a blockchain-based and traditional exchange.
• The bank will list digital bonds on SDX Trading and SIX Swiss Exchange.
• UBS treasurer Beatriz Martin said the plan demonstrates the investment bank's commitment to using technology to support the development of new financial market infrastructure.

Swiss investment bank UBS AG launched the digital hybrid bond on Nov. 3, which it claims is the world’s first publicly traded bond settled on a blockchain-based and traditional exchange.

According to the bank, the digital bonds have the same instrument structure, legal status and ratings as traditional UBS senior unsecured notes. In a statement, the bank said:

“Through this bond, UBS enables investors, regardless of whether they have the blockchain infrastructure, to invest in a digital bond. This removes a hurdle on the way to adopt new disruptive technology that can make issuing bonds faster, more efficient and simpler.”

The senior unsecured digital bond is a three-year 375 million Swiss franc ($272 million) bond with a coupon of 2.33 percent, according to UBS. The bank will list digital bonds on SDX Trading and SIX Swiss Exchange. It is included in the Swiss Bond Index along with other senior unsecured bonds from UBS.

Using atomic settlement technology, digital bonds will be settled through SIX Digital Exchange's (SDX) distributed ledger-based Central Securities Depository (CSD), which is instant and automated without the need for a central clearing counterparty. “Investors can choose to automatically settle and clear UBS digital bonds directly on SDX CSD or SIX SIS,” the bank noted.

UBS treasurer Beatriz Martin said the plan demonstrates the investment bank's commitment to using technology to support the development of new financial market infrastructure "not just as an enabler, but as a real differentiator for UBS.”

UBS is entering the cryptocurrency space after comments last year by the company’s chief executive that classified cryptocurrencies as an “untested asset class” and urged investors to exercise caution during a bull market.

Last month, Société Générale, another major European traditional financial institution, received approval from a Digital Asset Provider (DASP), allowing the French bank to offer custody and trading of digital assets through a subsidiary. The bank joins other international DASP operators such as Bitpanda, Binance and eToro.