IBM has partnered with Borsa Italiana, part of London Stock Exchange Group, in an effort to digitize securities certificate data for smaller companies.
On Wednesday, IBM and Borsa Italiana, part of the London Stock Exchange Group (LSEG), announced a collaborative effort aiming to use blockchain to support the digital issuance of securities for smaller firms in Europe. The new solution could make it easier for the firms involved to manage their shareholder information, according to a press release.
Blockchain, originally developed as a supporting technology for cryptocurrency Bitcoin, is a distributed ledger that tracks transactions, connecting them to other transactions nearby and securely encrypting the information. Using blockchain, IBM and Borsa Italiana could create a registry of all shareholder transactions, the release said, advancing trading and investing opportunities.
"Through our work with IBM on this blockchain solution, Borsa Italiana is taking the lead in transforming the way European SMEs can manage their shareholder data and at the same time expand credit access - all on a trusted digital platform," Raffaele Jerusalmi, CEO of Borsa Italiana, said in the release.
Instead of issuing paper trading certificates, the new blockchain solution could provide a more secure digital framework for tracking the trading process, the release said. This could offer more transparency to issuers and regulators as well.
"Traditionally, private SMEs lack access to public stock exchange networks or formalized credit structures," the release said. "With this solution, SMEs in Europe can better access credit and link into a broader and more mature investor ecosystem, enabling them to set up new trading networks and obtain funding by sharing financial data in a security-rich and transparent public arena."
The joint solution will be built on Hyperledger Fabric version 1.0, an open source platform for distributed ledger solutions, which is hosted by the Linux Foundation. It utilizes high levels of encryption, and will integrate with LSEG's existing systems.
Marie Wieck, general manager of IBM Blockchain, wrote in the press release that blockchain technology could "help remove some of these barriers in traditional methods for the transfer of value - much as the Internet did for the exchange of information in the late 1990s."
The IBM and Borsa Italiana blockchain project is currently being tested among a small group of company partners and clients.
Blockchain technology has moved out from under the shadow of Bitcoin, creating an entirely new market for solutions built on top of it. This effort from IBM and Borsa Italiana highlights the potential for blockchain in highly-regulated industries like securities trading and the financial sector, where compliance requirements often necessitate strict security and transparency.
Outside of these verticals, blockchain could also impact journalism, the music industry, the energy sector and more. Alex Tapscott, co-author of the book Blockchain Revolution, once said that "blockchain technology represents the second generation of the internet."
The 3 big takeaways for TechRepublic readers
- IBM and Borsa Italiana, part of the London Stock Exchange Group (LSEG), are building a blockchain tool to help manage the digital issuance of securities for smaller firms in Europe.
- The joint effort could help keep shareholder transaction data secure, and provide even more transparency around company information for other parties.
- Outside of securities, blockchain technology is poised to disrupt banking, journalism, the energy sector, and more.
- Growth of Enterprise Ethereum Alliance signals blockchain's impact on future of business (TechRepublic)
- Blockchain: IBM and London Stock Exchange Group team up for securities data project (ZDNet)
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- Yes, Blockchain could reverse the course of civilization and upend the world's most powerful companies (ZDNet)
- How blockchain could revolutionize IoT security (TechRepublic)