Blockchain and Distributed Ledgers Technologies (DLT) are quickly and quietly disrupting the asset management industry. Here are five reasons why everyone in the value chain should be thinking carefully about Blockchain and DLT.
1. It is rapidly becoming the lingua-franca of the global system infrastructure
More than a single solution or technology, Blockchain and DLT technologies essentially connect together to form a new type of market infrastructure that sits on top of – and integrates into – existing systems and processes. And in doing so, it is quickly and quietly changing the way firms, regulators, investors and managers communicate and share data.
2. It is enabling future competitive advantage
Blockchain investments may not be paying massive returns yet, but they are allowing some firms to create the right platform for future growth. The adoption of Blockchain and DLT should unlock unprecedented business flexibility, improved efficiency and new capabilities that could be leveraged to rapidly respond to changing market dynamics and competition in the future.
3. It is fundamentally disrupting the value chain
Blockchain will add significant value – improving confidence between parties, reducing friction in the value chain and speeding up complicated inter-party processes. But it will also mean the disintermediation (or, more likely a refocusing) of certain players in the value chain. Players should be sizing up their future position and managers should be reassessing their value chains.
4. It will be ubiquitous within the next five years
Clearly, it will take many years – maybe decades – for Blockchain and DLT to become the dominant technology in the asset management space. But we expect to see many players (particularly in the mid- to large-sized funds) start to shift processes and transactions towards Blockchain and DLT platforms over the coming year, thereby creating the scale to drive ubiquity.
5. It is supported by regulators and watchdogs
To be clear, no regulator has yet to mandate the use of Blockchain or DLT technologies in the asset management space (nor in the wider financial services industry). But signs from mature markets and developing markets alike suggest that regulators and watchdogs are carefully considering how the technologies could be used to improve market transparency, compliance and auditability.
There is no doubt that Blockchain and DLT technologies will have a fundamental – and in some cases disruptive – impact on the sector. Our advice to all players in the value chain is to start developing a clear and strategic roadmap that will allow your organization to respond to, and capitalize on, the shift towards Blockchain and DLT technologies.
We also advise organizations and managers to learn more about Blockchain and DLT. We encourage them to talk to all players in the new environment – advisors, startups, FinTech investors, regulators and others – to better define their roadmap. And we suggest they attend industry events (such as this year’s FundForum) to build stronger collaborations.
At this year’s FundForum, we’ll be talking a lot about Blockchain and DLT technologies. We will offer our perspective on the value of the technologies in the asset management space. And we’ll be showcasing a number of interesting use cases for the asset management front, middle and back office.
Look for us at FundForum to talk more about Blockchain and DLT in the asset management space.