DLT and Liquidity in Private Markets

Introduction

Private markets including private equity, private credit and infrastructure investments have historically suffered from illiquidity. Investors often commit capital for years, with limited opportunities to exit before maturity. Secondary trading of these assets has grown (the private equity secondary market reached ~$132 billion in 2021 and an estimated $162 billion in 2024​), yet this volume remains small relative to the multi-trillion dollar private asset universe. Blockchain and distributed ledger technology (DLT) have emerged as potential solutions to unlock liquidity in these markets by enabling tokenization (digital representation of assets) and new trading infrastructure. This report analyzes the rise of DLT-based secondary trading platforms in the European Union (EU) and Switzerland, key metrics and pilots demonstrating their impact, evolving regulations and how institutions are integrating these innovations into traditional finance workflows.

Private Market Liquidity Challenges and Key Metrics

Private equity and other private assets are typically illiquid, changing owners only through negotiated sales that can take months. These constraints lead to steep “liquidity discounts” and infrequent price discovery. For example, even as private equity assets under management have grown past $10 trillion globally, annual secondary transaction volumes (the resale of fund stakes or private holdings) are only on the order of $100–160 billion​jefferies.com. In 2022, secondary fund interests often traded at 10–20% discounts to their net asset value amid market stress, reflecting the cost of illiquidity. Transaction processes are slow, with transfers in traditional secondary deals settling in weeks or months due to paperwork and regulatory checks. Blockchain-based platforms promise to improve several key liquidity KPIs:

Secondary trading volume: By broadening investor access and standardizing digital transfer, tokenization can boost trading activity. In theory, a larger pool of buyers/sellers and easier trading could raise secondary volumes beyond today’s ~$150B level. Some early indicators are emerging for example, JPMorgan’s Onyx and Broadridge’s blockchain collateral networks already handle tens of billions in weekly repo trades using DLT​ledgerinsights.com, hinting at the scale possible when institutions embrace blockchain for trading markets.
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Tokenized asset AUM: The total assets under management in tokenized form are growing quickly from a small base. Boston Consulting Group estimated about $310 billion in tokenized assets in 2022, spanning asset classes from equity and bonds to real estate and infrastructure and projects a potential $16 trillion of tokenized illiquid assets by 2030 (about 10% of global GDP)​ledgerinsights.com​ledgerinsights.com. Within Europe, tokenized fund and bond offerings have begun to contribute to this figure. For instance, Franklin Templeton’s on-chain U.S. Government Money Market Fund (a regulated fund in Luxembourg) reached over $500 million AUM by 2024, making it one of the largest tokenized funds​ledgerinsights.com. Even a French fintech startup, Spiko, attracted €161 million into tokenized UCITS funds in its first nine months, a notable uptake illustrating demand for digital-native financial products.
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Pricing efficiency: By enabling continuous trading and broader market participation, DLT platforms aim to narrow bid-ask spreads and reduce the illiquidity discount. Early evidence from analogous innovations in traditional secondaries suggests this is achievable: the introduction of evergreen open-ended funds in private markets (a non-DLT innovation) significantly narrowed bid-ask spreads for private equity secondaries and supplied additional capital to the market​jefferies.com. Tokenized markets could have a similar or greater effect. If accredited retail investors and global institutions can directly trade tokenized private equity stakes 24/7, competition should increase and pricing should converge closer to fair value (i.e. smaller discounts to NAV). In industry pilots, there have been cases where tokenized fund units trade much closer to their underlying NAV than typical secondary sales, thanks to real-time price visibility and more buyers. Increased price transparency via on-chain order books or automated market makers can further tighten spreads and improve price discovery.
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Transaction speed and settlement: Blockchain’s ability to automate and accelerate settlement drastically improves transaction velocity (the frequency with which an asset can change hands). A striking example is the European Investment Bank’s €100 million digital bond issuance on Ethereum. Because the bond was issued as tokens, settlement was completed in one day instead of the normal five dayy and same-day settlement would have been possible​goldmansachs.com. Smart contracts handled delivery-versus-payment, removing manual steps and intermediary delays. In secondary trading contexts, this near-instant settlement (often T+0 or T+1) means sellers get cash faster and buyers receive assets immediately, allowing them to re-deploy capital or collateralize assets without delay. By contrast, transferring a limited partnership stake in a traditional private equity fund can take weeks of legal processing; a tokenized fund interest could theoretically settle in seconds once compliance checks are automated. Faster settlement and continuous market hours (some DLT exchanges operate 24/7​finyear.com) contribute to higher transaction velocity, with assets potentially trading multiple times in the period they would traditionally trade only once.

Overall, these metrics indicate that if implemented at scale, blockchain platforms can meaningfully increase liquidity turnover (higher volumes and velocity), while improving market quality through better pricing and rapid, transparent settlement.

Emerging DLT Secondary Trading Infrastructure in Europe and Switzerland

In response to these opportunities, a robust ecosystem of DLT-based secondary trading platforms has emerged in the EU and Switzerland. These platforms serve as digital exchanges or marketplaces where tokenized private assets can be issued, traded and settled under regulated, institutional-grade conditions. Major stock exchange operators, consortia of banks and fintech startups are all contributing to this new infrastructure:

SIX Digital Exchange (SDX) | Switzerland: Switzerland’s SDX is a fully regulated DLT exchange and central securities depository (CSD) for digital assets. It received regulatory approval in September 2021 to operate a stock exchange and CSD using DLT. SDX provides an integrated platform for trading, settlement and custody of tokenized securities under Swiss law. By late 2023, six Swiss franc denominated digital bonds (totaling ~CHF 750 million) had been issued and settled on SDX using a wholesale CBDC. Trading is available to member banks and institutional investors, with plans to expand to other asset classes.  

Société Générale Forge and Digital Bond Platforms | EU: In the EU, large banks have developed DLT platforms for tokenized securities. Société Générale’s blockchain subsidiary, SG Forge, has issued multiple security tokens on public Ethereum, recorded under France’s DLT legislation. These tokens have even settled with central bank digital currency as part of Banque de France trials. SG Forge also launched a euro stablecoin in 2022 for on-chain settlement. HSBC also used its proprietary blockchain platform “HSBC Orion” to issue a $100 million tokenized bond, admitted on the Luxembourg Stock Exchange. Other institutions like BBVA, BNP Paribas, JP Morgan and Deutsche Börse have conducted pilots for tokenizing bonds and enabling secondary trading.  

HQLAx and Collateral Markets: HQLAx, built on R3’s Corda ledger, enables seamless trading of baskets of high-quality liquid assets (HQLA) between banks. Banks can instantaneously swap tokenized baskets of securities to optimize collateral. HQLAx has transacted billions in high-quality collateral trades, demonstrating institutional trust in DLT for secondary market trades.  

Startup Platforms for Tokenized Securities: Several fintech firms in Europe have launched marketplaces for tokenized assets. Swarm Markets in Germany, regulated by BaFin, offers 24/7 trading of tokenized public stocks and government bond ETFs on a permissioned DeFi platform. Tokeny, a Luxembourg-based fintech, provides tokenization technology for private companies and funds, which can be traded on marketplaces or within whitelisted investor networks.  

Consortium and Exchange Pilots: Initiatives like LiquidShare (backed by French banks and Euronext) aimed to use blockchain for SME share trading. Deutsche Börse’s D7 platform provides digital post-trade infrastructure in Germany for same-day issuance and paperless settlement of securities using DLT. Traditional exchanges are upgrading their back-ends to be DLT-ready for tokenized instruments.  

Case Studies: DLT Liquidity Pilots and Sandboxes

Multiple pilot projects and sandbox experiments in Europe have tested blockchain's capabilities for improving liquidity in private and institutional markets:

Project Helvetia (Switzerland): Led by the BIS Innovation Hub and the Swiss National Bank (SNB) with SDX, Helvetia explored the settlement of tokenized assets using central bank money. It demonstrated that a wholesale CBDC (wCBDC) could be issued on a DLT platform and used to settle tokenized securities on SDX instantaneously. SNB has since used wCBDC to settle live SDX bond issuances and extended the pilot.  

Project Jura (France | Switzerland cross-border): Another BIS Innovation Hub experiment, Jura tested cross-border settlement using euro and Swiss franc wCBDCs on a single DLT platform. It involved a tokenized French commercial paper transaction and an FX trade, achieving payment versus payment (PvP) and delivery versus payment (DvP) atomically.  

Project Promissa (Tokenized Promissory Notes): A joint effort by the BIS Innovation Hub Swiss Centre, the SNB and the World Bank, Promissa is building a proof-of-concept platform for digital promissory notes using DLT. The goal is to digitize these notes to improve their liquidity and transparency.  

European Sandbox Projects: The EU launched the European Blockchain Regulatory Sandbox in 2023, selecting pilot projects related to capital markets and tokenization. These projects allow innovators to live-test their solutions with regulatory feedback.  

SDX and Sandbox Regulatory Collaboration: SDX has a sandbox where Swiss private bank Julius Baer and others experimented with issuing tokenized art shares and venture capital fund stakes for secondary trading. Platforms like IZNES in France have also been operational, enabling investors to buy and sell fund shares directly from asset managers via DLT.  

Regulatory Landscape in the EU and Switzerland

Regulation has been a key enabler of DLT-based market infrastructure in both the EU and Switzerland:

EU DLT Pilot Regime (2023–2026): The EU introduced a pilot regime for market infrastructures based on DLT, allowing temporary exemptions from certain financial law requirements to facilitate experimentation. It created new license categories for DLT MTFs, DLT SS, or integrated DLT TSS to handle tokenized financial instruments with certain limits. The Czech Republic’s CSD Prague was the first authorized DLT settlement system under this regime.  

MiCA and EU Securities Law: The EU passed the Markets in Crypto-Assets (MiCA) Regulation in 2023, creating a unified framework for crypto assets not regulated as securities. EU regulators are also updating traditional laws like the Central Securities Depositories Regulation (CSDR) to accommodate DLT. France, Germany, Luxembourg, Italy, Spain and Liechtenstein have also implemented enabling laws for tokenized securities.  

Swiss DLT Framework: Switzerland's “DLT Act” came into effect in February 2021, introducing the concept of ledger-based securities in Swiss law. This allows Swiss companies to issue equity or debt in digital form on a blockchain with full legal recognition. The DLT Act also created a new licensing category for a DLT Trading Facility, which SIX Digital Exchange obtained. Swiss regulators have also clarified custody rules and AML/KYC requirements for crypto assets.  

Investor Protection and Market Integrity

Both EU and Swiss regulators emphasize that tokenized markets must uphold investor protection and market integrity standards.  

In conclusion, the EU and Switzerland are at the forefront of developing DLT-based infrastructure for secondary trading in private markets. Regulatory frameworks and pilot projects are paving the way for increased liquidity and efficiency in this traditionally illiquid asset class.
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‍Disclaimer: GX Securities operates solely as a DLT infrastructure provider and this article does not constitute financial advice or an offer of securities.