Blockchain's `Irrelevant' in Plan to Automate Investment Banking

(Bloomberg) -- The London fintech firm behind the first regulated cryptocurrency bond is attracting investors to help it automate capital markets without using the blockchain -- for now.

Nivaura Ltd. closed its $20 million seed round this week with an investor group that was led by London Stock Exchange Group Plc and included Banco Santander SA, Aegon NV and magic circle law firms Allen & Overy and Linklaters.

While the company has grander ambitions of tokenizing equities and using the blockchain to clear securities, it’s focused for now on selling a platform that’s trying to revolutionize the issuance and execution processes of debt, equity and structured notes.

The funding round is the latest example of financial companies taking stakes in ventures related to distributed ledgers while turning more realistic about what can be achieved for now. JPMorgan Chase & Co. said this month it will introduce a prototype digital coin to speed up corporate payments.

“Structuring instruments, negotiating various things, executing and settling -- this is happening right now, this can be automated,” Nivaura Chief Executive Officer Avtar Sehra said in an interview. “Blockchain is irrelevant. What we think is going to happen is while we’re connecting into a clearing system now, you can just switch over with the click of a button to a blockchain.”

The London-based company, which was founded in 2016, plans to use the funds to support sales of the capital-markets platform and expand into Asia and North America, he added.

‘End-to-end’ Automation

Nivaura brands its product as an end-to-end automation process for managing a financial instrument’s whole life cycle. It can negotiate and formulate the instrument’s legal structure with various parties’ inputs and existing precedents, price it and distribute it to clients -- all within the same system.

For now, it’s not too practical to tokenize securities because of the regulations around securities depositories, as well as the dominance of fiat currencies, like dollars and euros, Sehra said.

The headlong enthusiasm for crypto projects has also waned, with Bitcoin having plunged almost 80 percent from its peak.

LSE’s CEO Nikhil Rathi will join Nivaura’s board, which also includes Spencer Lake, former vice chairman of global banking and markets at HSBC Holdings Plc. Santander and Aegon invested in Nivaura through their venture capital arms, and the cryptocurrency-focused venture-capital firm Digital Currency Group is also a backer.

“Nivaura has proven its ability to deliver substantial cost reduction and open up new markets for clients,” Manuel Silva Martinez, head of investments at Santander’s InnoVentures unit, said in a statement. “It also has the potential to be the backbone of totally new offerings in the investment banking space.”

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