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The London Stock Exchange Group (LSEG) has invested an unknown amount in the acquisition of a minor equity stake in London-based Fintech startup called Nivaura; it led a $20 million dollars (15 million pounds) funding round, which was followed by the venture capital arm of Banco Santander, Santander InnoVentures.
Nivaura is a blockchain startup that lets companies issue bonds and other financial instruments on blockchain. Launched in November 2017, Nivaura became the world’s first Fintech startup to automate bond issuance that is designated by cryptocurrency, and other financial instruments on the blockchain.
Issuing and settling the equities and bonds is a multiple steps process and require the involvement of numerous middlemen; multiple steps lead to inefficiency and excessive costs. Leveraging blockchain for tokenizing equity and debt can turn this multi-step complex process of trading financial instruments into hassle-free, instantly tradeable tokens.
According to Nivaura, tokenizing financial instruments such as equities, derivatives, corporate bonds, loans etc. can save up to 80% in time and money, and could dramatically reduce the cost of raising capital for enterprises. It is a digital platform that diminishes the necessity of a middleman and leads to faster executions and easy settlement with minimal cost.
It isn’t the first time that LSEG has shown interest in cryptocurrency and blockchain-focused projects. Previously, the LSEG has worked with Hong Kong based cryptocurrency exchange where it has provided its matching system to trade crypto, and also with IBM in 2017 to develop a blockchain-based platform that allows the enterprises in Italy to issue private equity digitally.
The head of international development at LSEG, Nikhil Rathi told Reuters that the LSEG is exploring blockchain to diversify the existing product portfolio and to bring out new financial instruments resulting in consistent growth of the exchange and hassle-free trading experience to their customers.
The Nivuara investment by the LSEG and Santander InnoVentures is the latest but not the first one in the growing trend of major financial institutions harnessing blockchain technology to explore the way to automate the issuance, settlement and trading process of financial instruments.
Other major firms include the world’s leading investment bank JP Morgan Chase, which has recently announced their own cryptocurrency prototype called JPM Coin. Another banking giant to invest in blockchain technology is the Hong Kong and Shanghai banking corporation (HSBC) that is also using a blockchain-based platform to cut the cost of settling international transactions.