European Fin Institutions Plan to Launch a Blockchain Investment Platform
According to a recent announcement, major financial institutions in Europe plan to launch a blockchain-based platform, which will focus on the investment fund sector. It has been in the works for a while now. The Luxemburg Stock Exchange incubated the platform and it is affiliated with some of the largest financial institutions. Some of the firms involved in the project are ClearStream, Credit Suisse Asset Management, and Fundsquare. The firms announced a Series A investment round for the platform, which has been named FundsDLT.
Helping to Cut Costs
FundsDLT will be powered by the Ethereum blockchain. With this platform, asset managers, asset servicers, distributors, and the supply chain will cut costs. To reduce costs, the platform eliminates redundant activities while offering more transparency and allowing the digital distribution of funds. With the aid of the Distributed Ledger Technology (DLT), this platform is going to streamline fund distribution. To achieve better efficiency, this platform is going to incorporate smart contracts in transaction processing, account management, cash settlement, and reporting.
According to Joseph Pinto, the Chief Global Operating Officer of Natixis Investment Managers, the digital transformation posed a lot of challenges and opportunities for the investment management sector. He added that blockchain would play an important role in this. According to him, it was critical for the investment management sector to improve its transparency and blockchain would help with that. With FundsDLT, the industry will be able to offer a better experience for investors, thanks to the use of blockchain.
Clearstream Banking S.A. CEO Philippe Seyll said that the platform would be an international initiative. It would streamline "a number of activities along the fund distribution value chain and has the potential to reduce costs for the benefit of investors across fund and investor domiciles". Seyll added that FundsDLT was a critical step in their digital strategy.
Michel Degen, Head of Credit Suisse Asset Management Switzerland and EMEA, noted that the firm was constantly working to ease access to their products. As part of their efforts to digitize, they would rely on FundsDLT as a powerful tool to help them boost efficiency. Besides that, it would allow them to create new channels for distribution, which would offer major benefits for both asset managers and clients.
How the System Works
A spokesperson for Credit Suisse explained that the platform would be based on the Ethereum blockchain. It would utilize the Quorum system and would operate as a private permissioned blockchain, which would ensure great performance and privacy. The spokesperson also noted that this platform would not rely on crypto assets. Instead, it will only rely on the DLT to improve services offered by current intermediaries with better efficiency.
Blockchain and the Finance Sector
Blockchain has the potential to improve the accessibility and transparency of systems. As a result, this makes it the perfect technology for the finance sector. Today, blockchain is being used all over the world, especially in Asia, where it has seen increased adoption in the finance industry. China already has a national blockchain strategy that will see it use the technology in almost every aspect of life. For instance, there are already over 20 banks in China that use blockchain to process more than $56 million in financial transactions involving foreign trade. Various other international banks are working on blockchain projects of their own. Some of the notable examples are BNP Paribas, Citi, and HSBC, which all plan to launch a blockchain finance platform that will be based in Singapore.
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