London Stock Exchange Group (LSEG) led a $20 million funding round in Nivaura, the startup behind world's first cryptocurrency bond, the two companies announced on Wednesday (Feb. 27).
The three-year old London-based fintech firm focuses on the deployment of digital investment banking platforms for banks, exchanges and other financial institutions, to connect and automate fragmented and manual processes involved in the issuance and administration of instruments such as any form of bonds, loans, equity, and structured products.
Other investors in the round include Santander InnoVentures, the Spanish bank’s VC arm,
Linklaters, a multinational law firm headquartered in London, Orrick, a San Francisco-based global legal services business, Transamerica Ventures, the corporate venture fund of Aegon (one of the world's leading providers of life insurance, pensions and asset management), MiddleGame Ventures, a fintech VC firm with offices in Luxembourg and Washington, Digital Currency Group, a New-York based VC company and Spencer Lake, a veteran capital markets banker, formerly Head of Global Markets and Vice Chairman of HSBC’s Banking and Markets Division.
Nivaura says the proceeds will be used to grow its tech team (including hires in machine learning and natural language processing), to expand into the U.S. and Asia, and to invest in further R&D.
“Our focus for 2019 is on conducting a series of high profile, large-scale projects with high calibre partners to demonstrate our platform as a valuable solution across the full spectrum of capital markets primary issuance activities. Working with such partners with their wealth of experience will underpin our next phase of growth” Nivaura’s CEO, Dr. Avtar Sehra, said in a statement.
(Nivaura's Core Services Graph Source: Nivaura)
Nivaura and the LSE have worked together in the past on the issuance of tokenised securities under Britain's Financial Conduct Authority's (FCA) regulatory sandbox.
Nikhil Rathi, CEO of London Stock Exchange plc and Head of International Development, LSEG commented: “The investment strengthens our existing relationship with Nivaura and underlines the Group’s partnership approach in innovating to support our clients in accessing global investment pools. We look forward to working with Nivaura to drive further innovation along the capital markets value chain to benefit both companies, their advisors and investors”.
The startup has participated in all of the first four FCA regulatory sandboxes, which allow businesses to test innovative products, services, business models and delivery mechanisms in the real market, with real consumers.
Back in 2017 as part of the FCA sandbox, LuxDeco, a UK online homeware and interior decor business, issued two bonds using Nivaura’s platform. One was a traditional sterling bond and the other was an ether-denominated bond that was structured, executed and administered through Nivaura's cloud-based service and cleared, settled and registered on the ethereum public blockchain.
The investment by London Stock Exchange Group is the latest in a small but growing trend of major financial firms identifying the merging cryptocurrency markets as an opportunity for expansion.
Earlier this year LSEG was involved in another cryptocurrency and blockchain-related project. It signed its first technology licensing deal with Hong Kong's Atom Asset Exchange.
“We’re seeing growing appetite from major financial institutions for practical innovation that goes beyond buzzwords and conceptual PoCs in ‘digital investment banking’. Boards are saying: go forth and innovate. But doing so in the highly regulated and complex world of capital markets is immensely difficult. With our now proven approach and compliance credentials, we are able to finally help our industry take practical steps to innovate and improve their economics” Dr. Sehra added.