London Stock Exchange plans blockchain-based market

The London Stock Exchange (LSE) is going ahead with plans for a blockchain-based trading platform after a year of examination reached an “inflexion point”.

According to a Financial Times report, the stock exchange hopes to have the platform, which will be part of its digital markets business, available in the next year if it gets regulatory approval.

Murray Roos, head of capital markets at the LSE, told the FT the plan was not to build “anything around cryptoassets”, but was about using blockchain, which underpins bitcoin, to improve the efficiency of buying, selling and holding traditional assets.

“The idea is to use digital technology to make a process that is slicker, smoother, cheaper and more transparent . . . and to have it regulated,” he said.

Roos added the LSE had waited until it was sure that the public blockchain technology was “good enough” and that investors were ready.

Blockchain is a record-keeping technology designed to make it impossible to hack the system or forge the data stored on it, thereby making it secure and immutable. It is a type of distributed ledger technology (DLT), a digital system for recording transactions and related data in multiple places at the same time.

Roos said the trading platform would not compete with its traditional business. “The ultimate goal is a global platform that allows participants in all jurisdictions to be able to interact with people in other jurisdictions, completely abiding by rules, laws and regulations, potentially multiple jurisdictions simultaneously, which is something that hasn’t been possible in an analogue world,” he said.

According to a report from Juniper Research in 2021, banks will reduce the costs of cross-border payments by $10bn (£7.35bn) by 2030 through the use of blockchain technology.

Juniper found that blockchain would reduce the cost of cross-border settlements by $301m in 2021, but that saving would increase by at least 3,000% over the next decade.

Beyond financial services, blockchain is being adopted in sectors such as healthcare, government, manufacturing, finance, logistics and retail.

Distributed ledger technology has been identified as an efficient and effective means of tracking and tracing goods and services. For example, the global air industry’s investigation into how blockchain could improve efficiency unearthed more than £300m of potential savings by using the technology to track and record cargo as it changes hands on its journey from producer to customer.