Date: 08 February, 2024
The City of Lugano recently released its second CHF 100 million ($114 million) native digital bond, settling transactions using the Swiss franc wholesale Central Bank Digital Currency (CBDC) within the Project Helvetia III initiative. This time-limited project permits CBDC usage until June 2024. The issuance, coming a year after Lugano’s initial CHF 100 million digital bond release, allows bond holding in both the SDX digital central securities depository (CSD) and the conventional SIS depository. The ten-year 1.415% bond is listed on both the SIX Digital Exchange (SDX) and the primary SIX exchange.
Lugano Set to Settle Second Digital Bond
Building on the success of Lugano, late last year, the wholesale CBDC facilitated the settlement of two other SDX digital bond issuances by the Canton of Zurich (CHF 100 million) and the City of Basel (CHF 105 million).
Leading the Lugano issuance were Zürcher Kantonalbank (ZKB), Basler Kantonalbank, and J. Safra Sarasin. Wholesale CBDCs, typically with limited access to banks, were utilized in this pilot, accessible only to participating banks. ZKB and potentially Basler Kantonalbank will settle using the wholesale CBDC, while the City will receive funds conventionally as it is not a CBDC participant.
The digital bond market demonstrated strong demand, with ZKB closing its order book in just 17 minutes. The bank received nine orders, with the largest allocation of CHF 8 million, despite a higher order amount. Asset managers secured nearly half of the allocation, followed by banks (22.8%), insurers (18.6%), and pension funds and treasuries.
Mayor Michele Foletti of Lugano emphasized that this initiative aligns with the city’s commitment to being a “model of innovation” and supporting digital transformation, technological innovation, development, and research to position itself as a cutting-edge city.
The trend of digital bond issuance is expected to accelerate, as seen with Hong Kong issuing digital green bonds valued at $756 million earlier this week.
References:
https://www.ledgerinsights.com/lugano-digital-bond-cbdc/
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