Northern Trust makes first use of smart contracts on private equity blockchain

Northern Trust launched its blockchain solution for private equity fund administration in 2017 and was awarded four US patents for digitising private equity.

By Joe Parsons

Northern Trust has deployed its first use of smart contracts on its private equity blockchain, partnering with a venture capital firm to use the technology on legal clauses.

The new capability was utilised for Emerald Technology Ventures, a $660 venture capital firm with funds administered on Northern Trust’s Guernsey-based blockchain.

Developed by legal-technology start-up Avvoka, it will enable participants to negotiate, review and digitally sign legal agreements. Northern Trust also worked with law firms Carey Olsen and Allen & Overy to digitally generate and agree to Limited Partnership Agreement side letters containing legally binding clauses.

“As financial markets move towards digital processes, Northern Trust will continue to drive the technology innovation that will redefine our industry,” said Pete Cherecwich, president of Corporate & Institutional Services, Northern Trust.

“The collaboration and innovation that led to this further breakthrough in blockchain technology is a testament to all parties involved. The ability to leverage digital documents that include smart contract code across multiple platforms is a very significant step toward the future digital environment of securities servicing.” 

Emerald Technology Venture was the first firm to a live capital call processed on Northern Trust’s private equity blockchain platform in November 2018.

Guernsey’s financial regulator recently approved an amendment to an existing law which validates the legal effect of using smart contracts.

“We see digital contract collaboration platforms growing in use and are excited that Northern Trust have developed this advanced technology capable of delivering smart contracts directly to its Guernsey-based private equity blockchain. This is a very significant development for the industry,” added Hans Dellenbach, partner and CFO, Emerald Technology Ventures.