Blockchain technology to be used to offer equity tokens for the first time

Eversheds Sutherland has advised client 20|30 Limited (20|30), a UK company building blockchain-based platforms for corporate equity issuance, on its admission to Cohort 4 of the Financial Conduct Authority’s (FCA) regulatory sandbox.

The regulatory sandbox allows businesses to test innovative products, services, business models and delivery mechanisms in the real market, with real consumers. The sandbox is open to authorised firms, unauthorised firms that require authorisation and technology businesses.

The UK FCA announced the successful admission on 4 July 2018, describing 20|30’s offering as “a Distributed Ledger Technology (DLT) based platform that will allow companies to raise capital in a more efficient and streamlined way”.

20|30 will now begin testing its platform, which enables the primary issuance of equity tokens using the Ethereum blockchain. The test will be conducted using Nivaura’s integration with London Stock Exchange Group’s (LSEG) Turquoise platform.

The test will enable the primary issuance of equity tokens to institutional investors through a regulated trading venue and aims to demonstrate a commercially viable model for tokenising company equity. 20|30’s overall goal is to establish equity tokens as a widely accepted means for companies to raise capital.

It will allow investors on LSEG’s Turquoise platform to place orders for equity tokens and matched orders will be cleared and settled on the blockchain using Nivaura’s custody services.

The investment platform creates a compliant, easy, safe and transparent process for approved investors to purchase equity tokens. For companies seeking equity investors, the platform should increase access to capital from larger investors.

The Eversheds Sutherland team was led by financial services Partner Andrew Henderson and supported by Associate James Burnie (financial services). The wider team included Partners Simon Gamlin (commercial), Stephen Nash (corporate), Jake Mcquitty (litigation) and Ben Jones (tax), Regulatory Director Sally Rigg (Eversheds Sutherland Consulting), Principal Associates Kirstin Mccracken (commercial) and Deepesh Upadhyay (tax), Senior Associates Toke Myers (commercial), David Cook (litigation) and Naz Gauri (litigation), and Associates Nal Townley (commercial) Chris Perks (commercial) and Nathan Lucas (corporate).

Andrew Henderson commented: “We are very excited to be involved with 20|30 in a project that has the potential to transform the manner in which companies raise capital and brokers trade shares.

“This project demonstrates the Eversheds Sutherland team’s ability to adapt existing law and regulation to develop new concepts to fit technical innovation and give regulators assurance, whilst providing practical, commercial advice to develop a trusted adviser relationship.”