Nasdaq Finds Another Use for Blockchain Technology
Nasdaq and the Republic of Estonia have announced that Estonia’s e-Residency platform will be facilitating a blockchain-based e-voting service to allow shareholders of companies listed on Nasdaq’s Tallinn Stock Exchange, Estonia’s only regulated securities market, to vote in shareholder meetings. The country’s e-Residency platform is an electronic identity system used by both Estonian residents and those with business interests in the country to access government services through e-Residency digital authentication.
As part of the program’s pilot, shareholders who are Estonian or Estonian e-residents will be able to participate in the corporate governance of companies more conveniently and securely than ever before. The e-Residency platform vastly improves the ability to authenticate shareholders for the e-voting service, while blockchain technology will allow votes to be quickly and securely recorded, streamlining a proxy voting process that has historically been labor-intensive and fragmented. The pilot is aimed to launch in 2016.
At the end of 2015, Nasdaq announced that an issuer was able to use its Nasdaq Linq blockchain ledger technology to successfully complete and record a private securities transaction – the first of its kind using blockchain technology. Chain.com, an inaugural Nasdaq Linq client and blockchain developer, documented its issuance of shares to a private investor using Nasdaq’s blockchain-enabled technology. Accoding to Nasdaq, the transaction represented a major advance in the application of blockchain technology for private companies.
Nasdaq Linq is a digital ledger technology that leverages a blockchain to facilitate the issuance, cataloging and recording of transfers of shares of privately-held companies on The NASDAQ Private Market. Chain.com describes itself as the leading blockchain infrastructure provider to financial institutions and enterprises. Chain says its platform enables the secure issuance and management of digital assets on a blockchain network.
For the Chain.com transaction, Nasdaq enabled the issuer to digitally represent a record of ownership using Nasdaq Linq, while significantly reducing settlement time and eliminating the need for paper stock certificates. In addition to its equity management function, Nasdaq Linq also provides issuers and investors an ability to complete and execute subscription documents online.
Nasdaq’s use of blockchain technology also holds promise for expediting trade settlement for transactions in public markets. Blockchain technology has the potential to assist in expediting trade clearing and settlement from the current equity market standards of three days to as little as ten minutes. As a result, settlement risk exposure can be reduced by over 99 percent, dramatically lowering capital costs and systemic risk. In addition, this technology could allow issuers to significantly lower the risk and the administrative burden of what is largely a manual and multi-step process today.
For more on blockchain technology see our article in the Minneapolis Star Tribune.
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