“The aim is to use Distributed Ledger Technology and SmartContracts to automate processes and thus reduce the need for reconciliations and increase transaction speed. Blockchain will also provide us with a toolbox to address certain issues in the fund industry,” says Olivier Portenseigne, Managing Director, Fundsquare.
RESHAPING FUND DISTRIBUTION
FundsDLT believes blockchain will play a significant role as an enabler to create complementary and alternative distribution channels and ways of operating. The project is focusing on how to enhance delivery and ensure funds reach the mass market.
“We are streamlining a range of fund administration and order-routing tasks by using blockchain to automate several processes securely. The model applies to a wide variety of funds and does not depend on the jurisdiction,” says Portenseigne.
“From an investor perspective, it's a mechanism to route order, settle and maintain a register. First, the investors use the FundsDLT mobile app to submit the standard subscription order for the shares. Via the API the order is transmitted to the FundsDLT platform, and the information is immediately and simultaneously transmitted using blockchain technology to the fund promoter and the other parties involved in the transaction, each one having its node on the FundsDLT blockchain.”
With the successful completion of the first transactions, the team plans to launch a blockchain engine for clearing and settlement by 2018.
“Having an app over an iPhone where you can easily buy funds will make a huge difference to the client experience. This is a big opportunity for asset managers to distribute their funds directly to the customer. Currently, only 10% of people in Europe are investing into funds, so the potential is enormous.”
BUILDING A BLOCKCHAIN INFRASTRUCTURE FOR THE GLOBAL FUND INDUSTRY
FundsDLT has been working closely with all the actors from the public and private sector on building what they hope to be the European Fund Infrastructure for the global fund industry.
“Regulatory changes would be required to take full advantage of blockchain technology, so we involve almost all the ecosystem around the fund industry to find solutions and ensure regulation keeps up with the rapid technological change. Our vision is to have one single funds infrastructure in Europe on Blockchain. This evolution will require a shift in mindset, but we need to adapt quickly and to think differently,” concludes Portenseigne.
MANAGING YOUR ASSETS WITH BLOCKCHAIN
Fundchain is an initiative set up by Scorechain - as featured in the September 2016 edition of LEO - a Luxembourg-based start-up which is working alongside a consortium of key players from the fund industry. After rolling out a smart transfer agent proof of concept (PoC) in December, Fundchain aims to have a distributed ledger-based product ready to bring to market next year.
“Our goal at Fundchain is to work collaboratively with major players in the financial center to put up the network effect Blockchain needs to be effective and powerful,” says Pierre Gérard CEO & Co-founder Scorechain.
OPENING NEW MARKETS TO NEW PLAYERS
“Last year we released a successful prototype which reduces processes and complexity dramatically for all stakeholders regarding funds management, including subscription, redemption, transfer and regulatory assessments. Now we enter into a new phase of Fundchain, and new players are joining the initiative with the goal to build the basis of an MVP - a minimum viable product.”