The centuries-old London Stock Exchange Group (LSEG) is embracing burgeoning bitcoin technology in the hope of scrapping outdated paper trading certificates for small and medium-sized businesses.
Borsa Italiana, which is part of the LSEG, has partnered with IBM to build a “blockchain” solution that will record all shareholder transactions and shareholding information for unlisted companies in Europe in a central, digital ledger, in hopes of replacing paper certificates.
“With a more digitised, streamlined and transparent process enabled by the blockchain solution, various parties – including issuers, regulators and investors – will have increased insight into company information,” according to the LSEG, which said the fintech programme is currently being tested by a small group of partners and clients.
Blockchain technology was originally developed as a hub to track transactions in crypto-currencies including bitcoin, but has since gained traction among mainstream banks and financial institutions.
It is widely seen as an opportunity to strip costs, serving as a central ledger to track and verify transactions.
The move is also expected to “open up new opportunities for trading and investment” for private small and medium-sized enterprises (SMEs) that otherwise lack access to public stock exchange networks or formal credit structures, the LSEG said.
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“With this solution, SMEs in Europe can better access credit and link into a broader and more mature investor ecosystem, enabling them to set up new trading networks and obtain funding by sharing financial data in a security-rich and transparent public arena,” it explained.
The technology will be built on a blockchain framework that will restrict sensitive securities data to authorised users, while using high levels of encryption to secure the information.
“LSEG is testing the use of blockchain technology in a financial business network where data segregation and confidentiality is vital,” LSEG chief operating and information officer Chris Corrado said.
“By working with IBM, a pioneer in building enterprise-class blockchain solutions, we are committed to building, testing and scaling our capabilities in emerging technologies over time.”