National Settlement Depository (NSD), Russia’s central securities depository, has announced that it has successfully finished developing and testing an e-proxy voting system running on a distributed ledger (blockchain technology).

NSD has been working on the project together with DSX Technologies. The prototype is based on the NXT distributed cryptographic platform, and uses ISO 20022 international standard for messaging.

Introduced at NSD in August 2014, e-proxy voting is an innovative technology for processing of corporate actions that provides for electronic interaction between securities holders and issuers for the purpose of exchanging information and documents. In April 2015, NSD upgraded the technology, streamlining it with the global ISO standards and this month, a blockchain-based prototype of e-proxy voting successfully passed the testing related to bondholder meetings. 

Eddie Astanin, Chairman of the Executive Board at NSD, said that after testing blockchain for bondholder meetings, they can extend the use of this technology to other business areas of NSD.

The e-proxy voting system facilitates a securities holder to vote via their personal account on the nominee's website using their digital signature. The nominee then enters the securities holder's vote into the blockchain, also accompanied by a digital signature. The nominee provides the securities holder with the identification number that has been assigned to their vote in the distributed database, confirming that the vote has been received. This record of the vote is passed on from one nominee to another until it reaches the central securities depository. Once voting is completed, the system calculates the results automatically, and NSD publishes them in the blockchain, using its digital signature. The use of cryptography ensures the integrity of the voting process during every stage.

All the members of the network (nominees and NSD) keep copies of the database, and in case of an inspection, the regulator/auditor gets full access to all the necessary information simply by joining the network.

Sergey Putyatinskiy, IT Director at NSD, explains: "We are currently aiming to increase the system's capacity and to enable the support of new voting types. Our next step would be to subject our new prototype to legal and cryptographic expert evaluation, which will give us a more definite idea whether the prototype is suited for real voting."