The London Stock Exchange (LSE) is turning to the technology behind cryptocurrencies in an attempt to revive the ailing market.
The LSE has unveiled a partnership with Payward, the owner of the crypto firm Kraken, to launch tokenised stocks on its own exchange.
The tokens will be listed on the company’s new round-the-clock service LSE 24, which will allow overnight trading on weekdays.
It is the latest effort by the struggling stock market to lure in traders and boost the City’s competitiveness after an exodus of blue-chip stocks and a long struggle to attract new public listings.
It also comes as banks, regulators and other financial institutions look at how crypto technology could make financial products more efficient.
Tokenised equities allow an individual to hold digital tokens representing shares in a company and cash in on the financial rewards if it rises or falls.
An ordinary share backs each token, but holders do not gain legal ownership, have no access to company dividends and have only limited voting rights.
These crypto assets have gained popularity because they can be traded around the clock.
Payward runs xStocks, a platform for tokenised equities traded on Kraken and other crypto venues. In the next few weeks, it plans to tokenise the 100 biggest stocks in the UK.
It is understood that under the partnership, these equities will be made available on the LSE.
However, the LSE ultimately plans to develop a tokenised equity that will exactly represent an ordinary share, giving its holder all the rights of a normal shareholder, including access to dividends and voting.
Arjun Sethi, the co-chief executive of Payward, said: “For years the assumption was that crypto and traditional finance were on a collision course, and one of them would have to lose.
“That was never the real story. The real opportunity is what happens when they run on the same rails.”
The trading of xStocks on the LSE is expected to start in 2027, subject to approval from the Financial Conduct Authority. LSE 24, which would operate separately from the main market, is also expected to launch in the first half of 2027.
Dame Julia Hoggett, the chief executive of the London Stock Exchange, said: “Tokenisation has the potential to change how investors access, and how issuers use, financial markets, but it must develop in a way that preserves the trust, rights and role of regulated markets.”
Some US stock exchanges have also announced plans to introduce tokenised equities, as well as longer trading hours.
The Nasdaq, in New York, is also looking at how to allow companies to issue tokens that would give holders the ability to vote and come with all the rights of an ordinary share.