Tokenised Bonds in Switzerland: Issuance Framework

Introduction to Tokenised Bonds in Switzerland

Switzerland has established itself as the preeminent European jurisdiction for the issuance of tokenised bonds, leveraging the legal foundation provided by the DLT Act and the institutional infrastructure of the SIX Digital Exchange (SDX) to create a fully regulated framework for digital bond issuance, trading, and settlement. Since the DLT Act’s entry into force in August 2021, Swiss issuers — including the Swiss Confederation itself, major commercial banks, development finance institutions, and corporate treasuries — have issued tokenised bonds that demonstrate the viability of distributed ledger-based fixed income instruments at institutional scale.

Tokenised bonds represent debt obligations of the issuer, structured and legally enforceable under Swiss law, with the distinguishing feature that the instrument is issued, recorded, and transferred on a distributed ledger rather than through traditional central securities depository infrastructure. The DLT Act’s introduction of the ledger-based security (Registerwertrecht) into Swiss civil law provides the legal certainty necessary for institutional adoption, ensuring that tokenised bonds benefit from the same legal protections and enforcement mechanisms as conventional bond instruments.

Legal Foundation

Ledger-Based Securities Under Swiss Law

The DLT Act amended the Swiss Code of Obligations to introduce Article 973d et seq., establishing the concept of the ledger-based security. A ledger-based security is a right that is registered in a securities ledger (Wertrechteregister) and can only be asserted and transferred through the ledger. The securities ledger must meet specific functional requirements:

• It must grant creditors, but not the debtor, the power to dispose of their rights through the ledger
• It must protect against unauthorised modifications through appropriate technical and organisational measures
• The content of the rights, the functioning of the ledger, and the registration agreement must be recorded in the ledger or in linked accompanying data
• Creditors must be able to view the information and data concerning them and verify the integrity of the ledger content

These requirements are technology-neutral, permitting implementation on public blockchains, permissioned distributed ledgers, or hybrid architectures, provided the functional criteria are satisfied.

Registration Agreement

The creation of a ledger-based security requires a registration agreement (Registrierungsvereinbarung) between the issuer and the initial creditor, specifying the terms under which the right is registered in the securities ledger. For tokenised bonds, the registration agreement defines the bond’s terms and conditions, the securities ledger on which the bond is registered, and the operational procedures for transfer, interest payment, and redemption.

Issuance Process

Structuring

The structuring of a tokenised bond follows the same principles as a conventional Swiss bond, with the additional consideration of selecting an appropriate distributed ledger infrastructure and determining the technical architecture for token representation. Key structuring decisions include:

• Currency and denomination: CHF, EUR, USD, or multi-currency structures, with denomination sizes adapted to the target investor base
• Maturity and coupon structure: Fixed rate, floating rate, zero-coupon, or structured coupon arrangements, implemented through smart contract logic where applicable
• Ledger selection: Public blockchain (e.g., Ethereum), permissioned ledger (e.g., SDX’s distributed ledger), or hybrid architecture
• Smart contract functionality: Automated coupon payments, conditional redemption features, or programmable compliance restrictions encoded in the token’s smart contract

Regulatory Compliance

Tokenised bonds issued to Swiss investors must comply with FinSA requirements, including the preparation and approval of a prospectus (unless an exemption applies) and the provision of a key information document (KID) for offerings to retail clients. The prospectus must address technology-specific risk factors, including smart contract risk, ledger operational risk, and the legal framework governing ledger-based securities.

The issuer must also ensure compliance with anti-money laundering requirements at the primary issuance stage, with ongoing AML obligations borne by intermediaries facilitating secondary market trading.

Primary Distribution

Primary distribution of tokenised bonds may occur through traditional syndication arrangements, direct placement with institutional investors, or public offerings through regulated DLT platforms. The SDX provides a regulated primary market for tokenised bonds, enabling institutional-grade distribution with integrated delivery-versus-payment settlement.

Settlement and Custody

Atomic Settlement

One of the principal advantages of tokenised bonds is the potential for atomic settlement — the simultaneous, irrevocable exchange of the bond token and the payment currency in a single, indivisible transaction. Atomic settlement eliminates settlement risk (the risk that one leg of the transaction settles whilst the other does not), reduces the need for margin and collateral, and compresses settlement cycles from the traditional T+2 standard to near-instantaneous finality.

SDX implements atomic delivery-versus-payment settlement for tokenised bonds, using its distributed ledger infrastructure to ensure that the transfer of the bond token and the corresponding cash payment occur simultaneously. This settlement model has been further explored through the Swiss National Bank’s Project Helvetia, which tested the integration of wholesale CBDC settlement with tokenised bond transactions.

Custody Arrangements

Custody of tokenised bonds may be provided through regulated custodians operating on the relevant distributed ledger, self-custody by institutional investors with appropriate key management infrastructure, or hybrid arrangements combining on-chain token custody with traditional custodial controls. The DLT Act’s clarification of digital asset treatment in bankruptcy proceedings — including the segregation of tokenised securities from the custodian’s insolvency estate — provides legal certainty for institutional custody arrangements.

Notable Swiss Tokenised Bond Issuances

Government Issuances

The Swiss government’s digital bond issuance on SDX marked a watershed moment for the tokenised bond market, demonstrating sovereign-grade confidence in distributed ledger-based fixed income infrastructure. The issuance was conducted as a dual-tranche structure, with the tokenised tranche issued on SDX settling alongside a conventional tranche cleared through SIX SIS, ensuring fungibility and liquidity across both settlement channels.

Commercial Bank Issuances

Major Swiss banks, including UBS, Credit Suisse (now part of UBS), and several cantonal banks, have issued tokenised bonds on SDX and other DLT platforms. These issuances have encompassed a range of structures, including CHF-denominated senior bonds, green bond frameworks, and structured notes with embedded digital features.

Multilateral Development Issuances

International development finance institutions have utilised Switzerland’s tokenised bond framework for pilot issuances, testing the efficiency and accessibility benefits of DLT-based fixed income for sustainable finance and emerging market capital mobilisation.

Secondary Market Trading

Tokenised bonds listed on SDX benefit from the exchange’s regulated secondary market, which provides continuous price discovery, order matching, and instant settlement for listed DLT securities. The integration of trading and settlement within a single platform reduces operational complexity and counterparty risk compared to the traditional model of separate trading venues, central counterparties, and central securities depositories.

For tokenised bonds issued on public blockchains, secondary market liquidity may be facilitated through regulated DLT trading facilities, bilateral over-the-counter transactions between qualified investors, or, prospectively, through decentralised exchange protocols subject to appropriate regulatory compliance.

Taxation and Stamp Duty

Tokenised bonds are subject to the same tax treatment as conventional bonds under Swiss law. Interest payments are subject to income tax for the bondholder, and the issuer must withhold Swiss federal withholding tax at 35% on interest payments from Swiss-domiciled issuers (subject to double taxation treaty relief for foreign investors). The Swiss securities transfer tax applies to secondary market transactions involving a Swiss securities dealer, at a rate of 0.15% for domestic bonds and 0.30% for foreign bonds.

Cross-Border Considerations

The issuance and distribution of tokenised bonds across borders engages the securities law requirements of each relevant jurisdiction. Swiss-issued tokenised bonds offered to EU investors must comply with the EU Prospectus Regulation, whilst offerings to investors in other jurisdictions must address local securities law restrictions. The programmability of tokenised bonds enables the implementation of transfer restrictions through smart contract logic, automatically enforcing jurisdictional selling restrictions and investor eligibility criteria.

Outlook

Switzerland’s tokenised bond market is poised for continued growth, driven by institutional adoption, infrastructure maturation, and the demonstrated efficiency advantages of DLT-based issuance and settlement. Key developments anticipated include the expansion of tokenised bond programmes by Swiss and international issuers, the integration of tokenised equity and tokenised fund products with tokenised bond infrastructure, and the deepening of secondary market liquidity as institutional participation broadens.

The convergence of tokenised bonds with wholesale CBDC settlement — as explored through Project Helvetia and Project Jura — may ultimately transform the fixed income value chain, enabling fully digital, programmable, and globally interoperable bond markets.

Donovan Vanderbilt is a contributing editor at ZUG DLT. This article is informational and does not constitute legal or financial advice.