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Blockchain continues inroads into stock exchanges: LSE funds startup Nivaura

London-based fintech startup, Nivaura, has closed a second seed extension round which has been led by the London Stock Exchange (LSE) Group. The investment marks another milestone on the continuous inroads blockchain technology is making into the financial services sector.

The funding round raised $20 million for the blockchain technology company.  Alongside the LSE, other prominent investors included Banco Santander S.A., Aegon NV and law firms Allen & Overy and Linklaters.

Nivaura provides a regulated, digital investment banking platform for primary issuance (the first issuance of a stock from a private company for public sale) built from the ground up.

“Big picture, we are using technology to make capital markets more efficient and, more specifically, we are focused on the primary issuance and administration of financial instruments”,  Nivaura CEO, Avtar Sehra told Euromoney.

The company claim that trying to augment existing processes with digital solutions and interfaces offers little benefit in the primary issuance and capital markets space.  Similarly, deploying end to end platforms in parallel to existing systems makes for a costly and immensely complex duplication.

In current practice, securities settlement can be achieved through central securities depositories.  Nivaura’s platform could facilitate the structuring and syndication of securities on a tokenized basis, with settlement then occurring on the blockchain.  Notwithstanding that, the company’s current focus is on selling its platform to enable more efficient issuance and execution processes of debt and equity.

In an interview with Bloomberg, Nivaura CEO, Avtar Sehra said “Structuring instruments, negotiating various things, executing and settling – this is happening right now, this can be automated”.

For the future automation of investment banking itself, blockchain technology does not matter, he explained.

“Blockchain is irrelevant”, Sehra told Bloomberg  “What we think is going to happen is while we’re connecting into a clearing system now, you can just switch over with the click of a button on a blockchain”.

“Blockchain is irrelevant. What we think is going to happen is while we’re connecting into a clearing system now, you can just switch over with the click of a button on a blockchain”.
Avtar Sehra, CEO of Nivaura

Blockchain Tech Leading Financial Services Towards Tokenisation

Different approaches are being taken in the financial services arena when it comes to consideration of blockchain-based solutions.  In some instances, the application of the technology is being considered in parallel to conventional systems. However, the lines between conventional financial instruments and nascent digital assets are blurring.  Tokenisation of traditional assets such as real estate, equities, art, etc. is now possible.

Tokenisation is a process whereby some form of asset is converted into tokens which can then be moved, recorded and stored on a blockchain network.  Essentially, tokenisation converts the stored value in one physical or intangible object into a token that can be manipulated on a blockchain.

This is not the LSE’s first involvement with a blockchain/crypto related company.  Last month, it was announced that the company is collaborating with Hong Kong-based digital asset exchange, AAX.  It will provide AAX with its backend trading technology in order to enable the smooth operation of the exchange.  Many of the world’s leading stock exchanges are getting involved with various aspects of the technology – including Nasdaq, NYSE and Börse Stuttgart.

Many of the world’s leading stock exchanges are getting involved with blockchain technology – including Nasdaq, NYSE and Börse Stuttgart.

Following the announcement,  Sehra took to Twitter:

“Automation in primary capital markets is a challenging job – involving everything from gaining complex regulatory permissions and building required technology infrastructure to validate our ideas.  We’ve been working on this @nivaura for last three years!”

Vic Arulchandran, Chief Operating Officer with Nivaura clarified that although the company struggled to gain traction in the industry initially, it has overcome that:

“The first bank willing to provide us with client money accounts was Metro Bank. Since then we have been able to open client money accounts and custody accounts with Santander and Bank of New York Mellon.  That took a lot of work, but to have client money and custody accounts with tier one banks is very additive to our business.”

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Pat is a writer from the West of Ireland - currently living and working in Medellín, Colombia. He has always had an inquiring mind when it comes to new technology. His discovery of Bitcoin back in 2013 slowly led to a realisation of the implications of the underlying tech. As a consequence, Pat’s passion for blockchain technology has led him to focus his writing on the subject.

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