Finnish companies to digitalize trading of non-listed company shares

28.11.18 16:15 | Yritykset

This first-of-its kind initiative leverages distributed ledger technology to open up significant opportunities for companies, company personnel, investors, public authorities and financial service providers.

Several leading Finnish companies have collaborated to develop a new blockchain-based platform that digitalizes the share ledger, issuance and trading of non-listed company shares. The platform provides a reliable, simple and entirely digital way for non-listed company share trading by digitalizing the tokenized share register, shareholder register, issuance of new shares and secondary market trading of shares.

- Corporate identity and ownership record management is an interesting area for infrastructure level innovation because in the Nordics these processes and procedures are already mostly decentralized by law. What’s been missing so far is a way for companies to give mutually trusted and standardized digital guarantees about their own data to third parties, says Ville Sointu, Head of Emerging Technologies at Nordea.

- We’ve now come up with a way to bridge this trust and communication gap by using distributed ledger technology and our first real application on this new infrastructure is the ability to issue, buy and sell shares of unlisted companies, Ville Sointu says.

New growth opportunities for companies and more transparent information to public authorities

A significant share of Finnish household and enterprise financial assets are in non-listed company shares. However, for the most part, trading on this asset class has not yet been digitalized and relies on manual processes. As a consequence, non-listed company shares lack liquidity and the validity of shareholder information is challenging to verify for investors, financial service providers and public authorities.

The newly-developed platform will change this situation. As private sector companies and public authorities are part of the same process, verifiable information can flow seamlessly between all stakeholders, making non-listed company share trading fully digital, liquid and easy. In addition to reducing administrative burden, this new digital platform improves accessibility and visibility to this asset class for all parties and enables the creation of new financial products and aftermarket services.

Building a global market-ready platform with customer piloting to start in 2019

Digital business and consumer information services provider Asiakastieto Group, financial groups Nordea and OP Group, investment service group Privanet and software and services company Tieto carried out all the development work in Finland. The project also included experts and advisory from the Finnish Tax Administration, Finnish Patent and Registration Office as well as Borenius Attorneys.

While the network platform is developed in collaboration between Finnish industry players, it could also be scaled outside of Finland. The technology solutions are not geographically limited. The platform is based on open source Corda and Hyperledger Indy distributed ledger technologies.

- On technology side we’ve been working on a new hybrid ledger approach where we use Hyperledger Indy for identity and permission management and R3 Corda for orchestrating distributed workflows. These two platforms complement each other almost seamlessly and this combination really gives us the best of both worlds, says Ville Sointu.

The newly-developed distributed ledger-based business network is currently a proof-of-concept and the plan is to start customer pilots during 2019. The consortium is looking forward to involving start-ups and investors in contributing to this initiative during the development of the business network.

Additional information and contact details can be found on the press release on Tieto Corporation’s website.

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