London Stock Exchange Launches Blockchain Platform for Private Funds

LSEG’s new platform, called DMI, aims to cover everything from issuance, tokenisation, and distribution through post-trade settlement and servicing. The system is built on Microsoft Azure. Its design emphasises interoperability, meaning it will work both with traditional financial systems and with distributed ledger technology (DLT).

Private funds are the first type of asset to be onboarded, while expansion to other asset classes remains planned. Workflows that historically have been manual, slow, and costly are intended to be streamlined. As part of the platform’s launch, LSEG is making private funds discoverable via its financial desktop product, Workspace; general partners will be able to connect with professional investors on it.

LSEG’s Digital Markets Infrastructure has already seen its first deal. MembersCap used it for the MCM Fund 1 raise, with Archax in the role of nominee. EJF Capital joined as an early participant. The activity suggests initial demand is real, not just experimental.

Why This Matters?

Private markets have long trailed public markets on speed, transparency, and efficiency. Fundraising settlements can stretch for weeks, with multiple intermediaries adding to costs. Investors and managers often face difficulties connecting, deal terms lack clarity, and post-trade administration can be cumbersome.

While public markets gained efficiency through technology, digital trading systems, central clearing, and uniform regulation, LSEG’s approach takes a different path. Rather than mirroring public market standards, it layers in distributed ledger tokenisation to streamline processes, reduce friction, and improve oversight.

Exchanges in different markets have experimented with blockchain applications, whether in post-trade, digital securities, or tokenised assets. Few, however, have offered a seamless chain. LSEG’s model seeks to close that gap, delivering full lifecycle support in a regulated environment, something earlier projects struggled to achieve due to fragmentation or regulatory barriers.

In the UK, LSEG’s own partnership with Microsoft, first formalised in 2022, laid the groundwork. Microsoft acquired a stake in LSEG, and the two have been moving infrastructure and analytics systems toward cloud and digital-asset readiness. DMI builds on that vision. Compared with peers in continental Europe or Asia, LSEG appears relatively early in moving from pilots to actual live fundraising.

Technical and Regulatory Landscape

The platform runs on Microsoft Azure’s cloud infrastructure, with security, resilience, and scalability as core features. Designed for interoperability, DMI can connect with both existing DLT networks and traditional finance systems. Regulation is a central pillar: LSEG highlights that the platform is overseen and that partners such as Archax already operate under FCA supervision.

Here, tokenisation refers to converting private fund interests into digital tokens. These tokens are regulated financial claims, not speculative coins. The platform also manages settlement and asset administration within its framework.

Operational risk is a key concern, from system failures to cybersecurity issues and potential smart contract flaws. Regulatory risk is present as tokenisation, disclosure, and investor protection standards differ across jurisdictions. Expanding to other assets will likely introduce new technical and legal complexities. Private fund liquidity is naturally constrained, and while Workspace supports visibility, matching investors with opportunities remains difficult.

Institutional investor backing will play a central role. Assurance of platform reliability and robust legal and custody frameworks is expected. Change-averse fund managers and investors may slow the pace of adoption.

Implications for the Private Funds Market

If DMI functions as intended, it could reduce the cost of raising and servicing private funds. The platform has the potential to shorten the time between commitment and capital deployment, lower back-office overhead, and improve data transparency.

It could also allow fund managers to attract a broader range of investors outside their usual networks, thanks to enhanced discoverability.

For LSEG, the launch strengthens its position in digital financial infrastructure. It aligns with global trends in which exchanges and market infrastructure providers invest in technologies that increasingly integrate traditional finance with digital assets.