Deutsche Börse, Swisscom, and three partner banks have successfully settled tokenized securities transactions in a Proof-of-Concept. Was this the final step before the launch of a digital asset exchange?
The goal of the Proof-of-Concept (POC) was to demonstrate “how immediate and secure settlement of legally binding securities transactions in shares of small and medium-sized enterprises (SMEs) could work in the future,” reads the official press release.
Jens Hacmeister, Head of New Markets at Deutsche Börse Group said, “It is of strategic importance for us to further develop the possibilities for settlement of securities transactions using DLT. This brings us one step closer to our goal of enabling the financial services industry in Germany and Switzerland to efficiently use the potential of this new technology.”
An excellent example of successful collaboration and innovative strength
To make it work, the team first had to digitize the share registry of a Swiss company. This happened in cooperation with daura – a platform focused on the digitization of SMEs. In the next step, the shares of the company were tokenized.
Deutsche Börse provided blockchain-based cash tokens in Swiss Francs via its subsidiary Eurex Clearing to settle the transaction. To back up these cash tokens, money was deposited as collateral with the Swiss National Bank. The banks then served as counterparties and exchanged security tokens against the cash tokens to facilitate the securities transaction.
The cash and security tokens were processed using different protocols, namely Corda and Hyperledger Fabric. Using a cross-chain secure settlement, the parties could ensure no one had to make an advanced payment.
Deutsche Börse and Swisscom co-developed the necessary IT architecture. Swisscom hosted the system. The involved banks were Falcon Private Bank, Vontobel, and Züricher Kantonalbank. Custodigit provided custody services and management of the assets, and several law firms were involved in providing the legal framework.
Johs Höhener, Head of FinTech at Swisscom, comments, “DLT has the potential to reach a new level of speed and efficiency in the financial services sector. In order to maintain Switzerland’s leading position in digital assets, cooperation and new platforms are needed. This proof of concept is an excellent example of successful collaboration and innovative strength across company boundaries.”
Regulated exchanges advance into the digital realm
Deutsche Börse, Germany’s leading stock exchange, is advancing further into the digital space. In March, Deutsche Börse, Swisscom, and Sygnum have announced to build a regulatory compliant “trusted digital asset ecosystem” in Switzerland.
This project is competition to SDX, the digital exchange of Switzerland’s leading stock exchange SIX. According to Deutsche Börse, the first products and services will launch within this year. Most likely, this POC was one of the final steps before launch.
Deutsche Börse has also initiated some projects in Germany. The company has announced to launch Bitcoin Futures and Deutsche Börse Venture Network will work together with CashLink to tokenize startup equity via CashLink’s blockchain-based platform. Investors can complete their investment process entirely digitally and startups can raise funds via security tokens.
Exchanges in the German-speaking region are getting more serious about blockchain. Börse Stuttgart, for example, has recently launched a crypto trading platform and listed six of Amun AG’s crypto ETPs for trading. That’s a good sign for the future of the industry: The market entry of regulated exchanges will be a boost to investor confidence and mark a significant improvement of the overall exchange infrastructure.