Swiss city Lugano issues third blockchain bond: report

The Swiss city of Lugano issued its third bond using blockchain technology. The bond is valued at $139 million and has a dual listing on the digital exchange and the traditional exchange.

According to the Global Government Fintech report dated November 7, the city of Lugano has issued three digital bonds worth a total of CHF 320 million ($365 million) in the last two years. Digital bonds are issued using distributed ledger technology and are listed on both the SIX Digital Exchange and the SIX Swiss Exchange, Switzerland’s main exchange.

The city’s latest blockchain bond was announced on November 4 and was valued at CHF 120 million. It was issued as part of the Swiss central bank’s wholesale central bank digital currency pilot program known as Project Helvetia. The bond is planned to be exchanged via CBDC wholesale on November 25.

Lugano issued its first blockchain bond in January 2023. This bond, with a six-year maturity and a value of CHF 100 million, was called a “digital native” bond.

The second blockchain bond, also worth CHF 100 million, was issued in February 2024. The bond, issued by the joint venture of Zürcher Kantonalbank and Basler Kantonalbank, has a maturity of 10 years and a coupon of 1.415%.

Paolo Bortolin, Lugano’s vice president of finance, claimed that he did not understand why other issuers were reluctant to issue digital bonds via blockchain. In his experience, the process was seamless and not much different from the traditional bond issuance process.

“After the first issuance, we realized that this technology could represent the future of finance and decided to continue the issuance of digital bonds through SDX,” he said.

He said the use of blockchain technology by the public sector is still low. That’s why he hopes Lugano’s ongoing efforts to issue digital bonds will help drive widespread adoption.

“Our last issuance showed that investors are ready to purchase fully subscribed digital bonds in less than an hour. I strongly encourage other issuers to join us in embracing the digital future of finance,” Bortolin said.

Besides Lugano, the city of St Gallen, the Swiss Union Bank and the World Bank have also issued bonds on SDX.

Lugano is widely known for its embrace of cryptocurrency and its mission to transform the city’s financial system into a hub for Bitcoin and blockchain innovation.

In December 2023, Lugano began accepting Bitcoin (BTC) for tax payments. The city has also launched a Bitcoin-pegged stablecoin called LUGA, which can be used to pay at more than 350 stores in the city.