The LSE is ready to test a decentralised platform for issuing equity tokens, created alongside blockchain experts Nivaura – and is working towards a decentralised exchange
The UK Financial Conduct Authority has invited a group of blockchain startups to participate in its regulatory sandbox scheme, which allows businesses to test products, services, business models and delivery mechanisms in the real market, with real consumers – getting oversight and advice along the way regarding how best to ensure compliance with regulation, and what safeguards they need to implement to better protect their customers.
The 11 taking part are part of a group of 29 that form the latest additions to the scheme, which allows small scale trials innovative products with real customers while avoiding the risk of falling foul of existing rules.
Sandbox tests are expected to have a clear objective (eg reducing costs to consumers) and to be conducted on a small scale, so firms will test their innovation for limited duration with a limited number of customers.
BlockEx: a platform for the issuance and management of regulated bonds using Distributed Ledger Technology (DLT).
Capexmove: which uses DLT allow small companies to raise capital.
Etherisc: a smart contracts service providing fully automated, decentralised flight delay insurance.
Fineqia: Blockchain-based digital platform that enables companies to issue and administer debt and equity securities, including bonds backed by cryptoassets.
Fractal: DLT and AI technology for SME credit applications.
Globacap: which uses DLT to simplify and streamline the issuance process of debt and equity securities.
Natwest: proposing a governance model based on DLT, enabling organisations to work collaboratively on “developing and running decentralised applications” to codify society rules in smart contracts.
TokenMarket: a funding platform using DLT make issuing shares more efficient.
Tokencard: connecting a centralised payment card to a decentralised blockchain.
Universal Tokens: leverages blockchain technology in the distribution of insurance products.
World Reserve Trust: a limited access blockchain that aims to provide cheaper and faster global trade payments and settlement using the Sīlùbì smart token.
20|30: DLT-based platform that allows companies to raise capital in a more efficient and streamlined way. The test will be facilitated in conjunction with London Stock Exchange Group and Nivaura.
The two that really leap out from that group, of course, are the projects proposed by Natwest and the 20|30 group, working with the London Stock Exchange Group.
The latter, working with financial instrument experts Nivaura is especially eye-catching, as it would appear to hint that it is working on a some kind of distributed ledger ecosystem not dissimilar to the end-to-end decentralised market proposed by SIX, the company behind the Swiss Stock Exchange, which we featured late last week.
According to reports, the 20|30 platform will issue equity tokens, based on Ethereum, to investors.
“The next step will be to offer secondary transfers. Then we can work our way up the ‘capital stack’ to reinvent private equity and, public markets,” 20|30 co-founder Tomer Sofinzon, told the Financial Times [Sub required].
For its part, SIX is expecting to get its “full end-to-end and fully integrated digital asset trading, settlement and custody service” up and running in the first half of 2019.
The SIX Digital Exchange, SDX for short, is – will be fully regulated by authorities in its native country, and backed by the Swiss National Bank, in the same way as its main exchange, and represented a big move by a major financial infrastructure player into DLT tech. Any major move by the LSE into a similar space, you’d suspect, would cause massive waves in the world of FinTech – this is not that yet, but its participation hints that it is at least hedging its bets on blockchain.
The intention for SDX is for it to eventually become a digital asset ecosystem, or “a platform that allows platform participants to build their own business models within that ecosystem… We are putting together a team of developers and advisors in creating ICOs and products around that” as it was put, with its own “‘App Universe’ of clients and other providers providing services around this ecosystem.”
Natwest, for its part, appears to be looking at codifying governance and customer protection rules within dApps, having declared that it will open source the results of its work should it be a success.
The FCA’s announcement on last week’s additions added:
“We have accepted a number of firms that will be testing propositions relating to cryptoassets. We are keen to explore whether, in a controlled environment, consumer benefits can be delivered while effectively managing the associated risks.”