London Stock Exchange Group (LSEG) said on Wednesday it had invested in a start-up that lets companies issue debt on blockchain, signalling growing interest from mainstream finance in the technology behind cryptocurrencies.
LSEG led a $20 million investment round in London-based Nivaura, paying an undisclosed sum for a minority stake, the two companies said in a statement.
Nivaura, a digital platform used for issuing and administering corporate bonds, loans and equity, was behind the world’s first automated cryptocurrency-denominated bond issuance in November 2017.
The platform enables financial instruments to be settled on existing clearing infrastructure, or as digital tokens that are recorded on public blockchain – the distributed ledger technology behind cryptocurrencies such as bitcoin and ethereum.
Nikhil Rathi, LSEG’s head of international development, told Reuters that LSEG was seeking to leverage technology to develop new products, boost efficiency and support growth.
The investment by LSEG is the latest in a small but growing trend of major financial firms embracing blockchain-related technologies, party in the expectation they will upend issuance, settlement and trading processes in the financial sector.
Issuing bonds and equities currently requires multiple steps and the involvement of multiple parties, making it an expensive and inefficient process.
Nivaura says it can slash the time from issuance to market for financial instruments by up to 80 percent.
Proponents say the “tokenisation” of debt and equity – essentially turning complex financial instruments into instantly tradable digital tokens – could dramatically cut costs for raising capital.
That could allow smaller companies, currently beholden to commercial lenders, to tap capital markets.
To be sure, the financial industry remains highly wary of cryptocurrencies, and by extension blockchain. They are worried about the perceived lack of security and lack of clarity over regulation.
But moves this year show major financial firms are warming to blockchain-related technologies.
JP Morgan said this month it would launch its own digital token, pegged to the dollar, that clients can use for instant transfer of payments over a blockchain network.
HSBC uses a blockchain-based system for settling foreign exchange trades, and told Reuters this month it had cut the cost of settling some transactions on the platform by a quarter.
LSEG has been involved in a number of cryptocurrency and blockchain-related projects.
In January it said a Hong Kong-based cryptocurrency exchange would use its matching system for trading digital coins.
In 2017, it worked with IBM to build a blockchain-based platform to digitally issue private shares of small and medium-sized enterprises in Italy.
Santander InnoVentures, Banco Santander’s venture capital arm, was among other investors in Nivaura. (Reporting by Tom Wilson; Editing by Mark Potter)