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The London Stock Exchange Group has completed its first transaction using a blockchain-powered system, marking the debut of its new infrastructure based on the technology behind cryptocurrencies.
LSEG said on Monday that its digital markets infrastructure had been used by reinsurance asset manager MembersCap to raise money for its latest private fund.
The move comes as big financial institutions seek ways to use blockchain technology, which they say makes the process of issuing, trading and settling financial assets faster, cheaper and easier.
LSEG is the first major global stock exchange to launch a complete blockchain-powered system. Many other similar projects have facilitated only part of the process, rather than everything from issuance to trading and settlement.
“We’re not talking here about cryptocurrencies, this is a completely different proposition, this is applying that technology to capital market transactions,” Darko Hajdukovic, head of digital markets infrastructure at LSEG, told the Financial Times.
Blockchain technology originated in the cryptocurrency industry but mainstream financial businesses such as exchange groups, banks and asset managers are seeking to use it to make buying, trading and holding stocks, bonds and other assets more efficient.
Hajdukovic said that for private markets in particular, the existing process was “very manual, it’s very costly, it sometimes takes up to 40-50 days for settlement. We are creating infrastructure for the 21st century.”
Blockchain technology allows stocks, bonds, funds and other assets to be “tokenised” — the process of creating digital tokens for assets to allow their ownership and transaction history to be easily recorded and tracked.
Larry Fink, head of asset manager BlackRock, is one of the most fervent advocates of blockchain technology. Tokenisation “will revolutionise investing”, he said recently, adding: “Markets wouldn’t need to close. Transactions that currently take days would clear in seconds.”
LSEG said it had built the system with Microsoft, which took a 4 per cent stake in the exchange group in 2022. Together, they have worked on building new products, including updating Workspace, LSEG’s Bloomberg terminal competitor.
Hajdukovic said that for MembersCap and other fundraisers, “the fact that funds are raising capital will be visible on Workspace. [That provides a] huge new pool of potential investors that these funds can attract.”
He added that the company had started with private funds and would expand to other assets over time.
