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The London Stock Exchange Group (LSEG) has revealed plans to launch a new blockchain-powered digital markets business that will use the technology underpinning cryptocurrency to enhance the trading of traditional financial assets.
“LSEG is exploring plans to build an end-to-end digital market ecosystem that will allow for the raising and transfer of capital in a more seamless, cost-efficient way across asset classes,” an LSEG spokesperson told Decrypt.
Murray Roos, head of capital markets at LSE Group, told the Financial Times that after nearly a year of examining the feasibility of blockchain-powered trading, the company has reached an "inflection point" and is preparing to advance its plans.
The group is considering whether to launch a unique legal entity for its digital markets business, and hopes to make the venture a reality within the upcoming year—pending approval from regulators.
LSEG is currently in talks with regulatory bodies in multiple jurisdictions, along with the UK government and Treasury.
Roos stressed that LSEG is “definitely not building anything around cryptoassets,” but is instead focusing on using blockchain to enhance the security and accessibility of asset trading. “The idea is to use digital technology to make a process that is slicker, smoother, cheaper, and more transparent... and to ensure it is underpinned by regulatory standards,” Roos told the Financial Times.
The growing trend of asset tokenization
LSEG’s plans are playing out against a backdrop of growing interest in real-world asset tokenization within the financial sector. By facilitating fractional ownership, asset tokenization not only boosts liquidity but also opens up access to assets that were traditionally viewed as illiquid.
Last June, Avalanche Foundation launched a $50M asset tokenization initiative, while Securitize introduced tokenized securities on the European market in late July.
At the same time, major institutional players like Bank of America have acknowledged the potential of tokenization. In July, the multinational investment giant published a study predicting that the tokenization of traditional assets to transform financial and non-financial infrastructure and public and private financial markets will take place within the next five to 15 years.
BlackRock CEO Larry Fink, a crypto skeptic until recently, admitted last year that "the next generation for markets, the next generation for securities, will be tokenization of securities."