On Tuesday, a Swiss private bank called Cité Gestion announced its new initiative in the blockchain industry.
The bank announced that it has started tokenizing its equity using blockchain technology. It is the first private bank to issue shares as ledger-based securities under Switzerland-based laws.
Sources reveal that with tokenization, the bank’s share registry will automatically and continuously update itself whenever a share transfer happens or capital increases. This would help the bank in managing primary and secondary market transactions in a wholly digital manner.
In addition, the new mechanism is being counted on in eliminating the need for a lengthy case settlement process and also does away with the need for buyers to inform the bank manually and update its shareholder registry. The tokenization would also facilitate more efficient and faster secondary market transactions by removing the administrative burden of current requirements like the written forms for the transfer of sheets between sellers and buyers.
The private bank has collaborated with Taurus, a digital asset company, to tokenize its shares. This partnership will help Cité issue its tokenized shares, manage the smart contracts that create the shares, and carry out asset servicing of its securities.
Cité said that the tokenization of its shares had been made based on the Capital Markets and Technology Association (CMTA) standards. CMTA is an independent association established by prominent actors from Switzerland’s financial, technological, and legal sectors to create common standards around issuing, distributing, and trading securities in the form of tokens using blockchain technology.
Christophe Utelli, Deputy CEO of Cité Gestion, said that the private bank was privileged to be the first bank to take advantage of new opportunities uncovered by the law in Switzerland to digitalize securities by tokenizing the company’s shares.
The private bank briefs that the tokens are being created using CMTAT, an open-source smart contract recommended by the CMTA and designed explicitly for the tokenization of securities, and recorded on Ethereum.
According to the report, Taurus was established in 2018 and is quite famous in the tokenization sector. It has been involved in tokenizing 15 firms covering equity, structured products, and private debt from companies based in Switzerland and across Europe.
In 2022, Taurus was also awarded a securities license from the Swiss Financial Markets Supervisory Authority to provide banking institutions and investors the ability to trade several assets, including tokenized securities.
While Cité Gestion is the first Swiss bank to adopt tokenized assets, it has become a common trend among financial institutions across the globe as it allows traditional financial players to lure more investors by using blockchain technology.
In September last year, an investment giant KKR tokenized its portion of its $4 billion private equity on the Avalanche blockchain to enable investors to access the asset class using a part of the required wealth. Following that, in October, Hamilton Lane, an investment firm, tokenized three of its funds through Securitize, a digital-asset securities company.
Last year, JPMorgan, a multinational financial company in collaboration with the central bank of Singapore, participated in its first-ever decentralized finance (DeFi) transaction.
According to the Monetary Authority of Singapore (MAS), the transaction was one of many to announce the commencement of Project Guardian. The pilot program’s goal was to identify the potential use cases of DeFi applications in the financial markets. Additionally, it was an asset tokenization and international transfer experiment.
Sources reveal that with more wealth management firms putting capital into private markets, the need to create new forms of access has become a trend.