Key Takeaways
- London Stock Exchange Group (LSEG) has launched a new blockchain-based platform for private funds.
- The first fund to be issued via the new “Digital Markets Infrastructure” (DMI) platform is the private reinsurance fund, MCM Fund 1.
- LSEG said it plans to expand the DMI to other asset classes in the future.
The London Stock Exchange Group (LSEG) on Monday, Sept. 15, launched a new distributed ledger technology (DLT) platform for private funds.
Dubbed the Digital Markets Infrastructure (DMI), the first fund to be tokenized on the new platform was MCM Fund 1, a private reinsurance fund launched by Members Capital Management.
LSEG Embraces Tokenization
LSEG has been exploring tokenization for years, and several experiments and pilots foreshadowed the new DMI.
As early as 2017, Borsa Italiana (which was owned by LSEG at the time) teamed up with IBM to test a blockchain-based platform to issue private shares of small- and medium-sized businesses.
The London exchange operator continued to expand into tokenization in the years that followed, investing in startups like Nivaura in 2019 and signing a 10-year agreement with Microsoft in 2022 that laid the groundwork for more recent DLT development.
The firm first announced plans for a new blockchain-based venue in September 2023. Speaking at the time, LSEG Group Head of Capital Markets Murray Roos said it would be an “end-to-end” system that records the full lifecycle of financial assets on-chain.
Initially slated for a launch in 2024, the platform was finally unveiled on Monday, with LSEG boasting of “blockchain-powered scale and efficiencies for the full asset lifecycle—from issuance, tokenisation and distribution to post trade asset settlement and servicing.”
For now, DMI is limited to private funds, but LSEG plans to expand the platform to other asset classes in the future.
MCM Issues First Shares on New Platform
The first firm to issue tokenized securities on DMI is Members Capital Management (MembersCap), a fund manager that specializes in tokenized reinsurance products.
MembersCap initially launched MCM Fund 1 using Archax’s multi-chain tokenization engine.
Archax has also been onboarded to the new platform and also acts as the nominee for an unnamed “major web-3 foundation” involved in the latest issuance on DMI, a press release stated.
What We Know About the New Platform
Although LSEG has disclosed few technical details about its new platform, it is known to run on a private, permissioned ledger hosted on Microsoft Azure.
The firm did not share which protocol DMI is built on, but it previously used Hyperledger Fabric for private-market experiments on the Borsa Italiana.
Other possibilities include R3’s Corda, favored by Six Digit Exchange (SDX), Canton, or a proprietary solution developed entirely in-house.
Tokens are non-transferable records, and LSEG maintains control over the underlying ledger and wallet keys. This approach is similar to full stack digital exchanges like Archax and SDX, only more centralized, because investors never actually “hold” the tokens
Next Steps for Digital Markets Infrastructure
Following the initial issuance of MCM Fund 1, LSEG said that a selection of funds from EJF Capital will be available on DMI “soon.”
Beyond the pilot use case, documentation lists multiple suitable fund strategies, including private equity, venture capital, real estate, and various types of private debt.
The company also said it plans to expand beyond private funds, indicating potential support for a broad universe of public and private investment products further down the line.
However, it is important to note that DMI is strictly an institutional and professional market infrastructure. At least for now, it explicitly prohibits retail participation and secondary token markets.
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James Morales is CCN’s blockchain and crypto policy reporter. He has been working in the news media since 2020, writing about topics such as payments, banking and financial technology. These days, he likes to explore the latest blockchain innovations and the evolving landscape of global crypto regulation.
With an educational background in social anthropology and media studies, James uses his platform as a journalist to explore how new technologies work, why they matter and how they might shape our future.
