Borsa Italiana joined the efforts with IBM, a leader in open-source blockchain solutions, to digitally issue private shares of small and medium enterprises (SMEs) in Italy.
Borsa Italiana, subsidiary of London Stock Exchange Group (LSEG), and creator of ELITE international business support and capital raising ecosystem that brought the total number of companies to more than 550 with over €42 billion (c.$48.3bn) in revenues, is the first exchange in Europe to be at the test stage for a blockchain initiative of this type.
The goal of the project is to digitize shareholding structures, facilitate cap table management and strengthen investor confidence. Still, despite the initial project focuses only on investment records, the group recognizes that this is a first step toward being able to digitize the actual shares, as well as future debt.
The blockchain solution created by Borsa Italiana may make it easier to record and keep track of the shareholding patterns in unlisted companies. The solution will be built using Hyperledger’s Fabric distributed ledger technology.
The implementation of blockchain solution will also mark possible abandoning of the archaic process of keeping records on paper with a copy in each company. With all stakeholder records on the blockchain, it will be possible to access the information from anywhere in a transparent way and to update the records whenever required once the participants agree to the changes.
The group hopes that the new technology will also make it easier for companies to access credit.
The new solution is likely to affect a company’s financing to a great extent. Creating shares on a distributed ledger would enable small, private companies to enjoy a greater shareholding flexibility and liquidity by lowering overheads and barriers.
Investors would be more interested in investing in private businesses knowing they could exit relatively easily, which would further facilitate access to financing. And the exchanges themselves would enjoy much lower administration costs and more transparent oversight.
The LSE Group’s initiative this way appears to be a positive step forward, for both market activity and blockchain development.
The implementation of blockchain solution will initially be limited to trials, in which a small group of clients and partners of London Stock Exchange will take part. It might soon see wide spread adoption based on the results.
For context, being one of the participating companies in Linux Foundation’s Hyperledger project, IBM is involved in multiple projects involving Hyperledger’s Fabric blockchain. The company is also working in collaboration with businesses, both big and small across various spheres including fintech, supply chain, logistics and more.
In addition, IBM has recently announced a new powerful transaction system called IBM Z capable of handling 12 billion encrypted transactions every day aimed to address the problem of data breach.