The blockchain revolution within the funds sector began in earnest this week after Calastone, which operates a transaction network for mutual funds, said it would start migrating its core technology to the new digital infrastructure about a year from now.
After a proof-of-concept in June 2017 sparked Calastone’s claim that fund trading on blockchain “can be done”, the firm now effectively says it “will be done” from 2019 onwards within its own transaction network.
The firm’s network is used by distributors, fund managers and transfer agents, meaning the migration to blockchain beginning in 2019 will be transformational for the industry, Calastone said.
The migration will make it possible for all trading entities and counterparties within its network to connect and process transactions, including settlement, digitally.
Trades within its network add up to £80 billion and generate 7 million messages a month.
Calastone places its blockchain development firmly within the context of costs, regulation and operational efficiencies, which are among the industry’s most salient topics.
Ken Tregidgo, deputy CEO of Calastone, said: “The funds industry is subject to increasing cost pressures, whilst investors continue to demand increasing returns and regulatory transparency. The initial shift we’re making towards blockchain marks the first major step to addressing these issues offering significant potential for the entire industry.”
Julien Hammerson, the firm’s CEO, said the technology would make its customers “future-ready” and that blockchain could lead to friction-free trading and lower costs, while at the same time deliver speed of service and regulatory transparency “which will soon be a basic pre-requisite worldwide”.
The Calastone project is not the only step forward this year for blockchain’s application to funds distribution. In July, a group of market participants including Natixis said investors had made the “first real” share purchases in funds using the technology.
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