Swiss city Lugano issues third blockchain bond: report

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

According to a Global Government Fintech report on Nov. 7, the city of Lugano has issued three digital bonds – worth a total of 320 million CHF ($365 million) – in the past two years. The 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 stock exchange.

The city’s latest blockchain bond was announced on Nov. 4 and valued at 120 million CHF. It was issued as part of the Swiss central bank’s wholesale central bank digital currency pilot program known as Project Helvetia. The bond’s settlement is scheduled for Nov. 25 through the CBDC wholesale.

Lugano issued its first blockchain bond on January 2023. It was dubbed a “digital native” bond with a tenor of six years and valued at 100 million CHF.

The second blockchain bond, also worth 100 million CHF, was issued on February 2024. Issued as a joint initiative with Zürcher Kantonalbank and Basler Kantonalbank, the bond has a 10-year tenor and a 1.415% coupon.

Lugano’s deputy chief financial officer, Paolo Bortolin, claimed he did not understand why other issuers were reluctant to issue digital bonds through the blockchain. In his experience, the process was seamless and did not differ much from the process of issuing a conventional bond.

“After the first issuance, we realized this technology can represents the future of finance, and we committed to continuing with digital bond issuances on SDX,” he said.

He said that utilization of blockchain technology by the public sector is still low. Therefore, he hopes that Lugano’s continued efforts of issuing digital bonds will help foster widespread adoption.

“Our latest issuance further demonstrated that investors are ready to buy digital bonds, with full subscription in under an hour. I strongly encourage other issuers to join us in embracing the digital future of finance,” said Bortolin.

Aside from Lugano, the city of St Gallen, the Union Bank of Switzerland and the World Bank have also issued bonds on the SDX.

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

In December 2023, the Lugano began accepting Bitcoin(BTC) for tax payments. The city also launched a Bitcoin-pegged stablecoin called LUGA that can be used for payments at over 350 merchants around the city.