Asset management using Blockchain

Asset Management Using Blockchain

Asset management using blockchain refers to the application of blockchain technology in managing various assets, such as stocks, bonds, real estate, and cryptocurrencies. Blockchain is a decentralised, distributed ledger technology that ensures secure, transparent, and tamper-proof record-keeping of transactions and asset ownership. Over the past few decades, the asset management industry has experienced substantial growth in size and complexity. To cater to investors’ demands for diverse global products, fund structures and exposure to various asset classes have expanded significantly.

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Asset Management Using Blockchain

Asset management using blockchain refers to the application of blockchain technology in managing various assets, such as stocks, bonds, real estate, and cryptocurrencies. Blockchain is a decentralised, distributed ledger technology that ensures secure, transparent, and tamper-proof record-keeping of transactions and asset ownership. Over the past few decades, the asset management industry has experienced substantial growth in size and complexity. To cater to investors’ demands for diverse global products, fund structures and exposure to various asset classes have expanded significantly.

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To support this global product set, the industry relies heavily on service companies that act as intermediaries between asset management firms and the clearing and settlement infrastructure. These intermediaries play a crucial role in ensuring smooth operations, but they can also add costs, delays, and potential inaccuracies in data and reporting.

Blockchain distributed ledger technology presents a viable alternative to these centralised intermediary systems. By replacing them with decentralised, secure, and transparent solutions, blockchain technology offers several key benefits

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Benefits of blockchain in asset management:

  • Increased transparency: Blockchain’s public ledger offers transparency in transactions and asset ownership, simplifying tracking and verification for investors and regulators.
  • Improved security: The decentralised nature and cryptographic protection of blockchain provide enhanced security, making it difficult for hackers or malicious actors to compromise the system.
  • Reduced costs: By eliminating intermediaries and automating processes through smart contracts, blockchain technology can significantly reduce operational costs and fees associated with traditional asset management.
  • Enhanced liquidity: Blockchain facilitates faster and more efficient trading and settlement of assets, improving liquidity and making it easier for investors to buy and sell assets.
  • Simplified compliance: Blockchain’s transparent ledger can help automate compliance and reporting requirements, streamlining regulatory processes and reducing the burden on asset managers.
  • Fractional ownership: Blockchain enables the tokenisation of assets, allowing for fractional ownership and increased accessibility to a broader range of investors.

Blockchain's Impact on Settlements, Transfer Agency, and Fund Valuations

Blockchain technology has the potential to transform various aspects of the financial industry, including settlements, transfer agency, and fund valuations. By removing intermediaries and providing a trusted and shared view of permissioned data, blockchain offers numerous benefits.

Settlements:

  • Reduce costs: Blockchain can significantly reduce costs by eliminating intermediaries and minimising reconciliation errors.
  • Speed up settlement: Faster validation of transactions leads to quicker settlements.
  • Increase resilience: A decentralised structure ensures no single point of failure, improving system resilience.
  • Improve transparency: Blockchain allows for easier monitoring and verification of transactions by authorised parties.

Transfer Agency:

The prevalence of intermediaries operating at an omnibus level has changed the role of transfer agents and led to debates about transparency and risk versus responsibility. Blockchain technology can:

  • Disintermediate and create direct linkages between fund managers and distribution platforms.
  • Provide a common view of data shared between distributors and fund managers, improving collaboration and reducing potential conflicts.

Fund Valuations:

Blockchain can bring the following benefits to the valuations process:

  • Enhanced accuracy and timeliness: Blockchain improves record keeping by providing a single, tamper-proof version of data accessible to all authorised parties.
  • Time-stamped source of pricing data: Blockchain offers a transparent, reliable, and time-stamped source of pricing data for more accurate valuations.
  • Shared common view of data: Service providers can collaborate more effectively by sharing a common view of data used in the valuations process.

In summary, blockchain asset management leverages the unique capabilities to enhance and streamline the management of various assets. The adoption of blockchain technology in the asset management industry has the potential to significantly improve efficiency, reduce costs, and enhance the overall quality of data and reporting.