Taking a leap into the digital age, the Nasdaq stock exchange has announced plans to use the publicly available real-time ledger of all bitcoin transactions with its private markets platform.
The ledger, known as “blockchain,” enables speedier, cheaper and more auditable transactions. Nasdaq’s pre-IPO trading arm will write a copy of its trades into the blockchain, using bitcoin tokens called “colored coins,” to represent ownership of equity shares and other assets.
“Utilizing the blockchain is a natural digital evolution for managing physical securities,” Nasdaq CEO Bob Greifeld said in a news release. “Once you cut the apron strings of need for the physical, the opportunities we can envision blockchain providing stand to benefit not only our clients, but the broader global capital markets.”
Nasdaq’s first application of the blockchain will complement ExactEquity, its cloud-based equity management solution that enables private companies to manage their capitalization table and stock plans more efficiently, Nasdaq said.
While other companies have expressed interest in using distributed-ledger technology, financial firms have typically dismissed Bitcoin itself as too risky for mainstream use, according to American Banker.
But IBM executive Richard Gendal Brown wrote in a blog post that with Nasdaq’s announcement, the financial industry now has a “brand-name firm experimenting for real” with the bitcoin blockchain.
Nasdaq’s move lends credibility to the idea of using “the inherent security and open-access of the bitcoin system to ‘carry’ representations of real-world assets,” Brown said. “Dismissing [Bitcoin] entirely could be a big mistake.”
But Robert Sams of Clearmatics, a clearing and settlement technology for OTC markets, said a “permissionless” ledger that anyone can use anonymously would not hold up in court.
“The law will not treat a ledger record as authoritative if everyone knows that the current longest chain contains blocks generated by an anonymous attacker who replaced a bit of history that was chronologically prior,” he wrote in a blog post.