Today a consortium of Finnish companies announced it is running a Proof of Concept (PoC) for trading unlisted company shares. The blockchain platform aims to digitalize the shareholder register and tokenize shares thereby enabling share issues and secondary market trading. The organizations involved are Asiakastieto, major Finnish banks Nordea and OP Financial, as well as Privanet Securities, and technology company Tieto.
In a statement, Tieto says that a significant share of Finnish household and enterprise financial assets are in non-listed company shares. Hence there’s a lack of liquidity which the new platform aims to address. It will also reduce the administrative burden and provide accessibility and visibility for the asset class.
The development included input from the Finnish Patent and Registration Office which runs the public register of Finnish companies. Additionally, the Finnish Tax Administration provided advice.
The reference to trading could be misinterpreted as blurring the lines with publicly traded shares. Private shares are often bought and sold, just not in a public forum.
However, Privanet appears to provide a platform for investing in unlisted securities – not unlike SecondMarket the US platform for trading unlisted shares. SecondMarket was founded by Digital Currency Group founder Barry Silbert and sold to Nasdaq. Ledger Insights is awaiting confirmation from Tieto.
Either way, private share transfers will become far easier. Also, there will be an up-to-date share registry which potentially could be publicly accessible.
For private companies, the current norm is to fill in paperwork, and a country’s company registry updates the list of company shareholders perhaps once a year.
“In cooperation with our customers we’ve been able to demonstrate the potential of the technology by leveraging it in creating a fully digital identity for companies as well as digitalizing the share ledger, issuance and trading of non-listed company shares. This revolutionizes the way investors and startups can transact”, said Markus Hautala, Head of Blockchain Solutions at Tieto.
The platform will use the digital identity system Hyperledger Indy to provide an identity for every company. The main distributed ledger technology is R3’s Corda. Both Nordea and OP Financial are R3 shareholders. Each of them are also involved in blockchain trade finance consortia. Nordea is part of we.trade and OP Financial is part of Marco Polo.
Tieto plans to start customer pilots in 2019.