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The London Stock Exchange (LSE) has allowed technology company 20|30 to sell shares worth around £3 million ($3.9 million) in tokenized form, according to the Telegraph. The transactions were settled in LSE’s test environment, dubbed Turquoise.
20|30 used its blockchain solution TokenFactory to sell the shares, and the ones that were sold now exist on a blockchain, which creates a cryptographic record of the transaction.
This brings the technology, which underlies cryptocurrencies including Bitcoin, to a regulated financial market for the first time, per the Telegraph.
Of note, 20|30’s share issue was regulated by the UK’s Financial Conduct Authority via its regulatory sandbox program, which 20|30 is a member of.
Here’s what it means:Companies can tokenize assets, which will help them cut costs and open up new industries to investors.
- Using blockchain eliminates the need for clearing houses to process transactions, in turn making it cheaper. With the money from the share sale, 20|30 aims to commercialize its technology and make TokenFactory available to other companies. 20|30 said it would charge a fee of 1% for initial public offerings (IPOs) using TokenFactory, which is a significant cut from the conventional fee of around 7% charged by exchanges.
- Other segments of the financial services industry are also aiming to tokenize assets.Convexity Properties announced in November 2018 that it will allow investors to purchase a piece of a luxury student complex in the form of blockchain tokens, making it easier for consumers to invest in the real estate industry. Additionally, Wyoming passed a bill in January that would allow corporations to issue blockchain tokens that represent stocks.
The bigger picture: As blockchain proves its benefits, more exchanges may look toward the technology to overhaul their legacy systems.
Exchanges have started to explore blockchain, and being at the forefront may give players a competitive advantage. The IPO space hasn’t changed much since 1970, and issues include the size of the underwriting fees, per the Financial Times.
Being at the forefront of new technologies can help LSE attract more future listings, especially if it can offer companies 20|30’s TokenFactory to minimize the fees they have to pay to get listed. It’s likely that more exchanges will explore blockchain technology to streamline their processes; SIX, the owner and operator of Switzerland’s stock exchange, has already taken a minority stake and board seat in blockchain startup PassOn AG as part of its plan to build out a digital asset ecosystem in October last year.