BX Digital, the Swiss subsidiary of the Boerse Stuttgart, has received authorization from Swiss regulator FINMA to launch a DLT trading venue for digital and tokenized securities, subject to the completion of certain conditions. It is also sister to the conventional exchange, BX Swiss.
Key features of the exchange include the trading of digital assets such as stocks, bonds and funds on a permissionless blockchain, initially Ethereum, and a link to the central bank for settlement purposes, enabling delivery versus payment (DvP). It sidesteps the need for a central securities depository (CSD).
Switzerland introduced novel laws supporting DLT trading venues back in 2021, but BX Digital will be the first to take full advantage. Of course there’s the SIX Digital Exchange, which has issued CHF 1.5 billion in securities which are traded on its platform. However, SDX has conventional licenses for a CSD and securities exchange. It’s securities are also hosted on a permissioned blockchain.
“We are very excited to launch this new type of financial market infrastructure. By integrating a public blockchain into the existing financial system, BX Digital is making a significant contribution to the efficiency of the capital market and the breakthrough of digital assets,” said Andreas Ruflin, Chief Digital Officer of BX Digital.
Central bank linkage for settlement
The link to the central bank was practiced in a different jurisdiction when Boerse Stuttgart participated in the European Central Bank trials for DLT settlement. While Germany has novel laws for digital securities issuance, secondary trading is governed by existing laws. The EU’s DLT Pilot Regime provides an exception, but many incumbents have shied away from it.
“The level of interest is tremendous. We have already been able to attract an ecosystem of partners and got banks and issuers excited about our new financial market infrastructure,” said Lucas Bruggeman, CEO of BX Swiss Exchange and Chairman of the Board of Directors of BX Digital.
Unlike some participants in the DLT Pilot Regime, BX Digital will not be directly accessible to retail investors. “BX Digital focuses on banks and investment firms that want to provide their clients with access to digital assets and develop additional products and services based on this offering. Indirectly, BX Digital aims to reach both retail and institutional investors,” a spokesperson told Ledger Insights via email.
The future role of CSDs in a digital world remains to be seen. One of the key challenges in the transition to digital securities is that institutions that want to participate have existing systems that link to CSDs. Side-stepping them can involve extra work in the interim.
Update: added spokesperson response regarding retail investors.
