Fund Forum: Collaboration builds the blockchain
07 June 2016 Berlin
Image: Shutterstock
While the primary use cases of blockchain are still up for discussion, use of the technology in asset management is likely to come about through industry collaboration, according to a panel discussion at Fund Forum international in Berlin.
Philippe Denis, chief digital officer at BNP Paribas Securities Services suggested that the distributed ledger technology could have a place in the post-trade environment, however he pointed out that blockchain itself is “not a financial product”.
Currently, Denis said, it is being used in niche markets where it will have a limited impact, and scalability is still a potential issue.
Stephen Bayly argued that in the asset management space specifically, the main use case of blockchain will be about creating a common data source which will close the gaps between custodians and service providers, while Akbar Sheriff suggested that the focus should be around collateral management and liquidity management, a point that he said has become more and more important.
The panellists also highlighted the use case of security and clarity around identity as a potentially strong use case, especially regarding regulatory reporting for the likes of MiFID II, and with regards to know-you-client and anti-money laundering rules.
Lawrence Wintermeyer, CEO of Innovate Finance and moderator of the panel, said that if the industry can find a more efficient way of handling know-your-client (KYC) and anti-money laundering (AML) data it could “free up trillions of capital”. He also pointed out that the UK’s Financial Conduct Authority (FCA) is very supportive of financial technology, particularly blockchain, adding: “we really need to get the regulator engaged.”
However, the group agreed that adoption of blockchain technology would be driven mainly by collaboration and consortia in the industry.
Michael Mainelli, chair of commercial think-tank Z/Yen, suggested that take-up of the technology will emerge in highly regulated areas such as banking and insurance, which will have to work together or risk a third party coming in to the space and taking control.
He said: “I think it’s going to emerge from large groups of people who have hitherto found it difficult to work together without people trying to take advantage of them.”
Bayly agreed that the ecosystem will have to adapt, pointing out that consortia are already developing in the asset management industry, saying: “today we are more in the collaborative space”.
Ann Doherty, managing director at J.P. Morgan, added to this, arguing that although collaboration is important, both asset managers and service providers have historically had a large “propensity for customisation,” and they are not likely to move to a completely standard platform, retaining instead their own private blockchain systems.
In addition, this will be on top of legacy systems, she said—banks are not starting with a “clean sheet … and neither are many people in the industry.”
She said: “Unless there is significant, wholesale cultural change within big parts of the industry there is always going to be the need for consolidators because people will want to have their own set-up. The private side of things will, I think, continue for a very long time.”
Philippe Denis, chief digital officer at BNP Paribas Securities Services suggested that the distributed ledger technology could have a place in the post-trade environment, however he pointed out that blockchain itself is “not a financial product”.
Currently, Denis said, it is being used in niche markets where it will have a limited impact, and scalability is still a potential issue.
Stephen Bayly argued that in the asset management space specifically, the main use case of blockchain will be about creating a common data source which will close the gaps between custodians and service providers, while Akbar Sheriff suggested that the focus should be around collateral management and liquidity management, a point that he said has become more and more important.
The panellists also highlighted the use case of security and clarity around identity as a potentially strong use case, especially regarding regulatory reporting for the likes of MiFID II, and with regards to know-you-client and anti-money laundering rules.
Lawrence Wintermeyer, CEO of Innovate Finance and moderator of the panel, said that if the industry can find a more efficient way of handling know-your-client (KYC) and anti-money laundering (AML) data it could “free up trillions of capital”. He also pointed out that the UK’s Financial Conduct Authority (FCA) is very supportive of financial technology, particularly blockchain, adding: “we really need to get the regulator engaged.”
However, the group agreed that adoption of blockchain technology would be driven mainly by collaboration and consortia in the industry.
Michael Mainelli, chair of commercial think-tank Z/Yen, suggested that take-up of the technology will emerge in highly regulated areas such as banking and insurance, which will have to work together or risk a third party coming in to the space and taking control.
He said: “I think it’s going to emerge from large groups of people who have hitherto found it difficult to work together without people trying to take advantage of them.”
Bayly agreed that the ecosystem will have to adapt, pointing out that consortia are already developing in the asset management industry, saying: “today we are more in the collaborative space”.
Ann Doherty, managing director at J.P. Morgan, added to this, arguing that although collaboration is important, both asset managers and service providers have historically had a large “propensity for customisation,” and they are not likely to move to a completely standard platform, retaining instead their own private blockchain systems.
In addition, this will be on top of legacy systems, she said—banks are not starting with a “clean sheet … and neither are many people in the industry.”
She said: “Unless there is significant, wholesale cultural change within big parts of the industry there is always going to be the need for consolidators because people will want to have their own set-up. The private side of things will, I think, continue for a very long time.”
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