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May 14, 2015

Nasdaq looks to Bitcoin as trials begin with blockchain on private markets

Stock exchange feels pressure to innovate as Silicon Valley moves into fintech.

By Jimmy Nicholls

The Nasdaq stock exchange will become the latest financial group to experiment with the cryptocurrency Bitcoin’s public ledger or "blockchain" technology as it starts trials on its Private Markets subsidiary.

Trades on the smaller market, which handles investment for firms yet to go public, will be written onto the blockchain, which allows transactions to be recorded without the need for a mediating third-party.

Bob Greifeld, chief executive at Nasdaq, which is based in New York, said: "Utilising the blockchain is a natural digital evolution for managing physical securities.

"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."

The stock exchange’s experiment will initially use the Open Assets Protocol, which is based on Bitcoin and allows assets to be issued and transferred between parties.

The move will see Nasdaq join many banks investigating the use of the blockchain to make their work more efficient, the Swiss bank UBS having announced only last month that they would open a Bitcoin lab in London to do just that.

Financial services has been feeling the pressure from Silicon Valley of late, having resisted technology innovation because of regulatory pressures in the wake of the 2008 financial crash.

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Consumer expectations are now forcing firms in the City of London and Wall Street to improve their services as start-ups offer services such as crowdfunding and peer-to-peer lending.

"We are always looking at new ways to leverage technology to provide client-centric solutions," Greifeld said.

"Our initial application of Nasdaq’s blockchain technology-enabled offering will modernize, streamline and secure typically cumbersome administrative functions, and will simplify the overwhelming challenges private companies face with manual ledger record-keeping."

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