Deutsche Boerse, Swisscom, and Sygnum have announced to build a regulatory compliant “trusted digital asset ecosystem” in Switzerland. The project will put SDX to the test.
In December 2018 we reported about SDX, Switzerland’s first fully-integrated digital exchange. SIX, Switzerland’s leading stock exchange had announced to launch the platform in early 2019.
Last week, Deutsche Boerse, Swisscom, and Sygnum announced they would launch a digital assets exchange in Switzerland.
The sector is getting more crowded. And that might be good.
Deutsche Boerse, Swisscom, and Sygnum: a 3-way joint venture
Deutsche Boerse is Germany’s leading stock exchange and operates one of the world’s largest trading centers for securities.
Swisscom is Switzerland’s leading IT provider. Among its customer base is the Swiss banking sector. Swisscom provides payment processing, securities processing, and securities data management solutions.
As part of the deal, Deutsche Boerse will invest into two of Swisscom’s subsidiaries: Custodigit and Daura AG. Custodigit is a digital asset custody solution, and daura AG enables non-listed companies to transfer and register Swiss securities.
Also part of the pack is Sygnum, a Swiss-/Singapore-based FinTech firm which owns shares of Custodigit. Sygnum will also invest in daura AG. This way, the partnership becomes a 3-way joint venture.
Deutsche Boerse, Swisscom, and Sygnum are planning to use distributed ledger technology to facilitate the issuance of digital assets, market making, custody services, and banking services, in a regulatory compliant manner. The announcement talks about building a “trusted digital asset ecosystem.”
“This cooperation, the complementary infrastructure, and expertise of the parties involved is a great opportunity for creating a comprehensive and market leading ecosystem for digital assets,” said Jens Hachmeister, Managing Director of DLT, Crypto Assets and New Market Structure, Deutsche Börse.
Increased competition will speed up market development
Deutsche Boerse’s aspirations for digital markets are not new. The company invested in HQLAX, a Corda-based platform for trading highly liquid assets between financial institutions. Eurex exchange, which is fully owned by Deutsche Boerse, has recently announced it is going to launch a range of crypto futures within this year.
The German stock exchange giant venturing into Switzerland means SDX will face some serious competition. Both companies used to run a joint venture called Scoach, which provided a European derivative trading platform, but the partnership agreement was terminated in 2013. Deutsche Boerse and SIX are stiff competitors.
There also is a rivalry between SIX and Swisscom, which is trying to get more business from banks, and blockchain could be a way to achieve this goal.
Launch planned within this year
According to Deutsche Boerse, the first products and services will launch within this year. Probably around the same time as the SDX launch.
The partnership is subject to anti-trust approval and a Swiss banking and securities dealer license from the FINMA will be necessary. Sygnum will apply for the license; after approval, it will provide banking services such as custody, deposits, lending, capital issuance via tokenization, brokerage, and asset management.
Hachmeister says, “With Swisscom and Sygnum we have two highly recognized partners on board, and we are looking forward to bundling forces. Continuing our investments in new technologies and driving the development around DLT forward is a key focus of Deutsche Boerse Group. Switzerland, known to be a nucleus for financial markets innovation, is the ideal starting point for Deutsche Boerse to drive this evolution forward.”
The competition will be good for the marketplace, and it will probably also speed up the development of digital asset platforms. The race is on. Will Frankfurt beat Zurich to the punch or the other way around?