Distributed Ledger Technology: When will the talk become a reality?

Part 1 - DLT: When Will the Talk Become a Reality? by Gillian Painter, Head of membership, IA and Engine

Part 2 - DLT FinTech Solutions for Investment Management

 

Part 1 - DLT: When Will the Talk Become a Reality? by Gillian Painter, Head of membership, IA and Engine

Imagine a world without a smart phone? Has anyone under the age of 25 ever had the need for an A-Z, disposable camera or a pocket diary?

Apple introduced the iPhone back in 2007 and we haven’t looked back. It was around this time Bitcoin was born marking a global uptick in the development of Distributed Ledger Technology (DLT) but how far have we really advanced in the last 13 years?

The 2019 Gartner, Inc. Hype Cycle for Blockchain Business indicates the potential impact of blockchain will be transformational across most industries within 5 to 10 years. However, whilst DLT seems to be somewhat stuck in the ‘trough of disillusionment’ there is real feeling that within the next 2 years we will see significant strides made in terms of real roll out and adoption within financial services.

A distributed ledger is just a digital database that allows information to be shared, recorded and synchronised in multiple places at the same time. Transactions and immediate processing have the opportunity to create significant time and cost efficiencies that will revolutionise current practices in investment management and create an alternative infrastructure allowing for incumbents to come together to better manage data and process transactions. With talk of savings of between 25-45%, why is adoption and change so slow? When will the talk become a reality?

Is it down to a lack of use cases? Is the tech really solving an underlying problem? Is it regulation? Or is it, for those tech historians, the BetaMax v VHS conundrum, and how do you get everyone to back the same horse?

Most agree the theory is sound and the benefits many, with improved security due to an immutable record of transactions. DLT also has the potential to improve operational efficiency with increased speed reducing costs and enhancing risk mitigation, but the lack of market familiarity with the technology is a significant cause of the slow adoption, with concerns around the regulatory framework also affecting widespread adoption.

The fact distributed ledgers, by their very nature, have neither a specific location, nor a centralised source of administration, raises substantive hurdles when it comes to their governing jurisdictions and applicable law. With governments and investors increasingly focusing on environmental, social and governance considerations, it may also be hard to ignore the environmental impacts of the intense computational power needed to confirm transactions at scale. This is as well as the issues facing immutable ledgers from data input discrepancies.

So what does the future hold?

Emergent technology by its very nature creates unease but also significant opportunity. For the first time we are starting to see a real proactive stance by regulators such as the Financial Conduct Authority, who have quite rightly stated their intention not to regulate the technology itself, but rather the outcomes created. And use cases remain varied, with fund distribution and post-trade custody and settlement at the forefront, along with trading and client on-boarding.

DLT providers are indeed showcasing a world of possibility and disintermediation which is becoming more and more pressing as clients require greater efficiency, greater transparency and reduced costs. COVID-19 has, from a technology perspective, demonstrated the art of the possible when it comes to taking informed risks in order to adapt to the changing needs of business and consumers. DLT isn’t going away but how quickly it is embraced remains dependent on a collective desire for change.

 

Part 2 - DLT FinTech Solutions for Investment Management

Engine is the Investment Associations FinTech Hub and Accelerator that identifies best in class FinTech solutions that are directly applicable to the buyside. We have highlighted 5 Engine FinTech solutions below that utilise DLT to deliver their solutions. To view all Engine member solutions, visit our solution directory page here.

 

Blockacre

Blockacre is a Hyperledger based white label platform addressing the challenge of enhanced liquidity management for investment funds, particularly for those investing in inherently illiquid assets.

Powered by blockchain, our proprietary logic automatically matches peer-to-peer inflow to outflow exchange, reducing the need for direct fund issuance and redemptions, thus helping provide investors with more confidence that their capital is not locked in. 

Click here to view further information about Blockacre’s platform.

Blockacre are currently in stealth mode and are looking for a partner that would be interested in working with them to help move toward their first beta release. Please contact Founder Chris Sargent at [email protected] for further information. You can also view the Blockacre website here.

 

Cygnetise

Cygnetise offers firms a decentralised application to digitally manage authorised signatories.  This includes bank mandate management, delegated authorities, authorized signers and authorised trader lists.

DLT is utilised creating a community database by which parties can easily share their signatory lists, keeping their data in their own control, guaranteeing tamperproof sharing, sharing on a peer to peer basis, and tracking an immutable record of all changes made. Such digitisation of this process removes paper whilst companies gain better risk oversight, corporate governance and control, plus removing lags in associated processes.

Click here to view further information about Cygnetise’s solution, and click here for an overview of the use cases.

To find out more, please contact Business Development Director Damian Bell at [email protected] or visit the Cygnetise website here.

 

Fund Admin Chain (FAC)

FAC is a DLT-powered digital funds network for launching and trading investment funds.

FAC enables investors and fund product providers to connect, transact and settle at lower cost and with less friction. All funded trades settle immediately after pricing through atomic settlement: an on-ledger synchronised ‘delivery-vs-payment’ (DvP), which reduces delay and associated risk
Network participants benefit from distributed record-keeping shared by all parties to a transaction, significantly reducing data duplication and reconciliation across the industry.

Click here to view further information about FAC’s solution

To find out more, please contact CEO Brian McNulty at [email protected] www.fundadminchain.com or sign up to FAC’s newsletters here.

 

Minted

Minted is a physical commodity management platform based on DLT technology. It provides a unique way to manage your physical assets such as Gold in a digital way. The feature rich platform allows you to buy, sell, transfer or even withdraw your commodities using a well thought out user interface designed by digital banking experts. The Minted platform uses DLT to ensure that the user can view each level of the process from the refinery, payment, vaulting partner through to the courier who delivers to your door.

Click here to view a video further outlining The Minted App’s platform.

To find out more, please contact Co-Founder Shahid Munir at sa@theminted.app or visit the Minted App website here.

 

VALK

VALK’s solution is an end-to-end software for asset managers and investment banks that automates private market transactions. 

VALK’s white label end-to-end digital transaction platform allows financial institutions to run their fundraising workflow 100% digitally but also allows them to connect to hundreds of financial institutions in the Corda and BT Radianz ecosystems as well as to next generation digital exchanges.

Click here to view a video further outlining VALK’s solution.

To find out more, please contact Co-Founder Antoine Loth at [email protected] or visit the VALK website here.