Hello everyone!
Sharing an interesting paper from Deloitte. Do you have experience of working with this blockchain and are you in the fund industry? Then share your lessons learned
Key points include:
- Disintermediation: Blockchain could eliminate intermediaries like transfer agents and fund registries, potentially allowing direct transactions between investors and fund promoters.
- Smart Contracts: These allow automated processes in fund transactions, reducing the time to transfer fund shares from days to nearly instantaneous.
- Challenges: Widespread adoption faces hurdles like scalability, regulatory uncertainty, and acceptance within traditional frameworks.
- Opportunities: Luxembourg's fund sector could benefit significantly, though there are risks of job displacement in roles currently handling fund administration.
Overview:
The "Impacts of the Blockchain on Fund Distribution" document outlines how blockchain technology stands to revolutionize fund distribution by enabling direct, peer-to-peer transactions that reduce the need for traditional intermediaries such as transfer agents, fund registries, and custodians. By implementing a decentralized and transparent ledger, blockchain can streamline processes, making fund subscription and redemptions faster and less costly. Smart contracts, automated and self-executing, play a critical role here, handling fund subscription terms and enabling near-instantaneous fund share transfers. This shift could reduce transaction processing times from several days to mere seconds.
A major benefit of blockchain integration is the potential for cost savings, with estimated reductions in fund distribution expenses by automating many administrative functions. Luxembourg, as a significant player in the cross-border fund distribution sector, could realize substantial efficiency gains. However, the document highlights potential risks, particularly the displacement of roles currently involved in fund processing and administration, which affects a large segment of Luxembourg's workforce in financial services.
While blockchain presents a strong value proposition, challenges to full implementation remain, notably issues of scalability, regulatory frameworks, and industry acceptance. The technology's success in the fund distribution sector will largely depend on overcoming these barriers and achieving broad, cross-industry collaboration, as well as a phased transition to blockchain systems that aligns with regulatory requirements.
You can download the paper from our library too!
------------------------------
Aya Pariy
------------------------------