Nivaura is a startup who states that they want to make issuance and administration of financial instruments cheaper and faster while ensuring compliance. They have worked to build their product and undergo regulator approvals while winning some recognitions from institutions such as UBS Future of Finance, Accenture Innovation Lab, Microsoft Ventures, Digital Swiss Kickstart Accelerator and FCA Sandbox.
The blockchain startup who was in a stealth and has recently went ahead and started making waves in the financial sphere is now launching another series of waves with the initiation of their first bond offering denominated exclusively in ether.
Another strong move for the crypto space and specifically Ether as it now supports another utilization.
Nivaura has worked with the legal framework set up by Britain’s Financial Conduct Authority and this new sort of offering was issued by the London based luxury retail startup LuxDeco. Nivaura and luxdeco worked with a host of industry leaders to create this offering that would meet a particular need that they had: To be able to raise bridge capital to meet short term seasonal demand.
What’s really going on with this new offering?
The specific significance isn’t necessarily in the adoption of ether and using it as the underlying asset or denominated currency but rather the use of the public Ethereum blockchain. The bond will be processed through it’s clearing, settling and registration on the blockchain. This implementation also acts as a small experiment in Nivaura’s overall mission.
“Making Financial Services Invisible: Technology for faster, cheaper and compliant on-demand issuance and administration of financial instruments.”
If the offering can go off without a hitch this means that they are well on their way to effectively executing and will be one step closer to accomplishing their mission of removing financial intermediaries. If they are able to remove financial intermediaries they are able to make the process much faster and efficient, minimizing costs and maximizing potential, allowing small business more access to investment on a much larger scale.
This new deployment helps to back the thesis of Nivaura team in proving that there is significant enterprise application potential when using public blockchains.
The founder of Nivaura, Sehra, stated :
“What we’re showing is you can use open public infrastructure for regulated financial instruments, and this is a very critical step, because from the earliest stages we’ve always believed that public blockchains are the way forward.”
Established Firm Associations
The other big name parties that were involved with the successful deployment include; JPMorgan, law firm Allen & Overy and Moody’s.
JPMorgan assisted in piecing together a bond that will be utilized for a variety of asset classes and customization for their own internal processes.
The law firm Allen & Overy was able to assist in putting together legally compliant documentation “that automated the work using Ethereum smart contracts”.
Lastly, Moody’s helped to price the financial instrument by giving the team the right information to generate yield curves, incorporating the volatility of Ethereum into the inherent structure of the bond.
According to Coindesk, specifically, while a control experiment (discussed in greater detail below) paid 2.5 percent annual interest, the ethereum bond is expected to offer annual interest of about 10 percent to help offset the perceived risk of using a cryptocurrency prone to rapid price fluctuations.
Ether used to purchase the bond was be deposited to a public address called the Nivaura Client ETH Account. To help conclude the process, investors, in turn, must confirm the account in which they’d like to receive principal and interest when the bond reaches maturity on Nov. 29.
While the entire process was designed to be as self-service as possible, a trustee service is also being provided by Australia-based Link Asset Services (previously known as Capita) in case the issuer defaults on the loan.
“A blockchain can’t do that,” said Sehra, elaborating:
“A blockchain can’t go and enforce a contract and reclaim the assets for the investors. This is essentially where an accountable third party is always required.”