NASD sees blockchain technology, cryptocurrencies as future of securities trading
Around the world, the use of blockchain technology and cryptocurrencies is growing and transforming businesses.
Proponents say it is the technology that will revolutionize the financial services, pointing to its ability to function without a central authority and also store data in a tamper-proof way.
Given its flexibility, security and distributed nature, it has become the base technology for a vast array of business applications from healthcare, real estates to finance or the law.
But more importantly, it is its prominent usage in reshaping the way securities are being traded. Through the use of blockchain technology, the World Bank floated the first conventional bond where it raised a total of $108 million (AUD160 million).
The finance instrument which the Bank called the ‘Kangaroo’ bond, was issued using its Blockchain Offered New Debt Instrument (bond-i for short after Sydney’s Bondi Beach) which helped reduce debt paperwork.
With the technology, banks could oversee investor bids in real-time, settle investments instantly and make the price-discovery process more transparent. The World Bank claims that this will help make it easier to raise funds for impoverished peoples.
Europe is also following the World Bank’s lead with several financial instrument issuance through the use of blockchain technology. Similarly, the United Arab Emirates (UAE) is planning on completing half of its government transactions using blockchain by 2021.
In spite of the growing buzz of blockchain technology, awareness of the usage of the technology has been low, driven by financial regulators raising red flags.
In a recent stakeholders forum, organised by NASD OTC Securities Exchange — a trading network that facilitates secondary market trading of all securities of publicly listed companies primarily in Nigeria but with a focus on the West African region — in Lagos, the importance of blockchain technology and cryptocurrencies, was the centre of discourse.
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The forum was aimed at educating stakeholders from different industries on the usefulness of blockchain technology in deepening the operations of companies in the unlisted securities market in Nigeria.
According to NASD, the future of securities trading lies in blockchain technology and cryptocurrencies; the faster Nigeria starts adapting the better.
“As technology evolves, the capital market community must also move along with the times. As a forward-thinking and responsible trading platform, NASD is committed to delivering a transparent, secure and convenient service,” Bola Ajomale, Managing Director and CEO, NASD Plc said. “There’s so much we can do. Imagine where small businesses can raise funds and transact abroad using bitcoins.”
At the forum, the leadership of the securities trading platform pointed out several benefits, the usage of blockchain technology and cryptocurrencies to include raising capital with ease; creation of a database for identity information where collectors and regulators hold nodes; and securitization where assets are converted to security token to achieve fungibility.
Enitan Pascal Odogun, ACIS, said the use of the technology means less time consumed in trading on the securities platform.
He said the decentralized system makes it possible for an individual to have total ownership and control of crypto assets, which is used as a crypto wallet that has a public and private key.
He noted that although the use of blockchain technology comes with several limitations in terms of its scalability, consumer protection, transparency, perception, and standardization, there are however proposed solutions to tackle such limitations.
These solutions, he explained, include changes in consensus mechanisms that would help in addressing scalability challenges; embedded supervision to address consumer’s protection and transparency, and awareness that would help in providing accessibility of information to address negative perception.
NASD is a Securities Exchange registered by the Securities and Exchange Commission (SEC) to operate a formal Over-The-Counter (OTC) market in Nigeria and has an authorized share capital of N500 million.
With Over 100 participating organisations and more than 200 hundred authorized traders, including 6 settlement banks, NASD Plc is one of the most credible trading platforms in Nigeria for investors and stock market operators.
On the outlook of the market, Ajomale says he expects the market to sustain the momentum of the right issues raised by corporates at the beginning of the year. “What is beginning to happen is that there is a small recovery in confidence and many players in different industries are looking to raise capital. We will also see IPOs coming into the market,” he said.