Digitalization cannot be avoided, and those who ignore it risk being left behind.
Although digital asset trading is still in its infancy, the investor appetite is certainly there for it. Many expect that flows into digital asset classes, such as security tokens, will increase exponentially over the next 5+ years.
Forward-thinking providers, including SIX, are developing the infrastructure to help investors trade digital assets.
“Most of the industry agrees that securities will eventually be digitalized and traded on distributed ledger technology (DLT). There is also broad consensus that there will not be a big bang, with everyone suddenly replacing traditional securities with DLT-enabled digital assets,” said Jesús Benito, Head Domestic Custody & TR Operations at SIX, speaking at TNF.
He added: “There will be a number of years whereby both traditional and digital assets co-exist with each other.”
To complement its traditional exchange business, SIX launched the SIX Digital Exchange (SDX), a wholly digital exchange which supports the issuance, trading, custody, and settlement of digital assets.
“Both the traditional exchange and SDX will co-exist with each other for a long time, but I expect they will eventually converge as we move from the old ecosystem to the new one,” said Benito.
Today, the exchange operator is trying to bridge the gap between the traditional and digital asset ecosystems.
But how is it doing this?
Benito said SIX, the Swiss central securities depository (CSD), has direct access to SDX’s CSD, which will make natively digital CHF-denominated bonds more accessible to the wider market. This operational link will enable investors to purchase digital bonds issued on the SDX CSD, but they can then be held and settled at the Swiss CSD.
Benito noted that SIX is also developing digital asset capabilities in Spain. In 2022, the company – along with BBVA and the Inter-American Development Bank (IDB) - unveiled the first bond issuance in Spain listed on a regulated market and registered using blockchain technology.
Smart contracts were used for the execution of the distribution, purchase and sale, settlement, and corporate events processes, using electronic money tokenized by BBVA for the management of cash throughout the term of the issuance.
By developing solutions that support both traditional and digital assets, service providers will put themselves on a strong footing to attract business as the investment process evolves.