Credit Suisse, Pictet and Vontobel have conducted a proof of concept to issue a tokenized investment product recorded on a public blockchain and traded on BX Swiss, a Swiss regulated stock exchange.
The three proof-of-concept processes (issue, trade, and settle) were completed within hours, as opposed to days in traditional financial environments.
The Capital Markets and Technology Association (CMTA) token standard and Taurus tokenization technology are used to issue tokenized investment products.
Trades in tokenized securities are settled in fiat currency (Swiss francs) through smart contracts and Target’s payment bridge DLT2Pay.
The financial industry is using blockchain technology to increase security and efficiency and reduce complexity
Geneva, December 13, 2022 /PRNewswire/ — For the first time, a major player in the Swiss financial industry has successfully developed and tested a new payment mechanism for tokenized investment products on public blockchain testnet infrastructure. Developed by the Capital Markets and Technology Association (CMTA), smart contracts enable streamlined processes, reduce complexity, increase security, and remove counterparty risk from transactions. The CMTA proof of concept is a milestone for the Swiss financial industry.
The proof of concept includes:
Issuance of tokenized investment products recorded in ethereum test the blockchain,
the trading of these commodities in Swiss francs on regulated Swiss stock exchanges, and
Settlement of transactions via smart contracts developed by CMTA.
These three distinct operations of issuing, trading, and settling all take hours to unfold, as opposed to days to unfold in a traditional financial environment.
“We are extremely proud to have developed this groundbreaking mechanism together with our numerous partners in the financial and technology industries. Jack Iflund, Chairman of the CMTA. “This will enable the industry to increase efficiency, simplify cross-border payments and improve the quality of service, and our customers will benefit from the increased efficiency.”
Vontobel and Pictet each issued actively managed share certificates representing baskets of shares. ethereum Test your blockchain, a process commonly referred to as “tokenization”. These securities were then traded on the platform of BX Swiss, a Swiss stock exchange regulated by FINMA. Transactions were settled bi-directionally on the blockchain. To do so, participants used an on-chain mechanism that guarantees the obligations of the parties. Payments in fiat currency (Swiss francs) are made possible by an application called DLT2Pay, a product of targens, which connects the blockchain to Switzerland’s real-time gross settlement (RTGS) payment system, Swiss Interbank Clearing (SIC). I was. state bank. The proof of concept leveraged CMTA’s standard token format and smart contract (CMTAT), as well as another smart contract that replicated the delivery-to-payment functionality of traditional payment systems. The creation, security aspects, and technical operations of the smart contract were carried out under the leadership of Taurus. Taurus technology was used to publish and manage structured products throughout their lifecycle.
The proof of concept was developed and conducted under the auspices of the CMTA with the assistance of representatives from BX Swiss, Credit Suisse, Homburger, Lenz & Staehelin, METACO, Pictet, targens, Taurus, UBS and Vontobel.
The proof of concept lays the groundwork for an alternative Swiss post-trade infrastructure that works without a central party (central counterparty and central securities depository), allowing participating banks to operate the entire securities trading value chain (issuance, settlement and custody). ).
Daniel GorellaHead of Digital Assets at Credit Suisse, said:Transactions made today ensure that tokenized products on public blockchains can be traded on regulated trading platforms, and that settlement of transactions on tokenized products can be performed in fiat currency without introducing counterparty risk. is clearly shown. A successful proof of concept is an important first step towards unlocking the benefits of tokenization in the future.“
Steve BlanchettHead of Group Technology Strategy and Innovation at Pictet, said:Tokenization is a key strategic element for the future of wealth management. This will allow issuers to streamline the process of managing the creation of investment products in ways currently unattainable with traditional infrastructure, significantly reducing time to market. With the solution tested in the proof of concept, the process that currently takes days can be reduced to hours. and finally within minutes.“
Anna Naomi Bundy LangStructuring – UBS Investment Bank Credit Solutions said:Tokenization has many use cases, but for it to become an established feature of modern financial markets, it is critical that tokenized products can be traded in major currencies and through regulated exchanges. . CMTA’s proof of concept shows that there is a path to achieving this goal.“
Marco HegrinChief of Staff, Structured Solutions & Treasury at Vontobel said:This proof of concept is just the first step towards defining a new standard for structured products in the form of smart contracts. Structured products are not only innovative products, they are also equipped with cutting edge technology. With fully automated smart contracts covering the entire lifecycle, the possibilities for expression in a pure code language are almost limitless, and blockchain technology can help design a new generation of financial instruments. ”
Matthias Müller, Head of Markets at BX Switzerland, said:For the first time of its kind, this proof-of-concept showed that exchange-performed transactions can be settled directly on the public blockchain between participants. Parties are no longer required to transfer tokens or cash to an exchange prior to trading to secure a trade. This is a big advantage in terms of speed, cost and risk management. Smart contracts used for settlement eliminate the counterparty risk that exists when the cash and asset legs of a transaction are completed independently of each other. A new regulatory regime for DLT-based trading platforms will enable BX Swiss to take full advantage of these developments.“
Jean-Philippe Aumasson, Co-Founder of Taurus SA and Chairman of the CMTA Technical Committee, said:We are pleased to see that consensus has been reached on using open standards for DLT-based marketplace infrastructure and CMTA’s smart contracts are recognized as the trusted technology in this regard. The use of jointly developed open source smart contracts reduces the cost of development and due diligence for participants, contributing to the reliability and efficiency of the Swiss fintech ecosystem.“
Samuel BisigBusiness Development and Product Manager at targens GmbH StuttgartSaid: “Targens’ DLT2Pay solution provides the missing link between DLT/blockchain and payment transaction protocols (here central bank clearing systems) for cash settlement of securities transactions. Unless a central bank digital currency (CBDC) is available, such a “trigger solution” is key when digital assets are traded outside of private cryptocurrencies.“
More information about the proof of concept (paper, video, animated graphics):
For more information, please contact:
phone: +41 44 251 01 43
Email: [email protected]
About the Capital Markets Institute
Capital Markets and Technology Association (CMTA) is a US-based non-profit organization. Geneva, Switzerland, brings together financial, technical and legal professionals to promote the use of new technologies in capital markets. The association will provide a platform for creating open industry standards for the issuance, distribution and trading of securities in the form of digital tokens using distributed ledger technology. Founded in 2018 by Lenz & Stecherin, Swissquote and Temenos with the support of his EPFL, it now has over 40 members representing the Swiss and international financial industry.
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Source Capital Markets and Technology Association (CMTA)