Distributed ledger technology has the potential to upend current processes involved in processing fund transactions, according to new research.

Blockchain, the technology underpinning the controversial crypto-currency bitcoin, could save asset managers globally nearly $3 billion a year, new research shows. 

Technology house Calastone has said blockchain could revolutionize the processes involved in buying and selling funds, help streamline transactions and generate mass savings for investors.

The firm estimated that based on daily trade volumes of funds in the UK, Ireland, Luxembourg, Singapore, Hong Kong, Taiwan and Australia, the technology could cut costs by $2.7 billion a year. 


Source: Financial Times

Significant savings could come from using a distributed market infrastructure, powered by blockchain, Ken Tregidgo, deputy chief executive of Calastone, said. Currently, fund transactions often require parties involved to input the same information multiple times, which is time-consuming and prone to errors. 

“That is a cost that is being paid and is ultimately being paid by the end investor, by you and me,” Tregidgo said. 

Last year, Calastone said it had used blockchain to buy and sell mutual funds under test conditions. It was able to process transactions equivalent to a full day’s trades sourced from across its client base, which spans more than 1,400 fund distribution and asset management clients across 35 countries.

Put simply, a blockchain is a virtual distributed ledger of transactions shared peer-to-peer that can record ownership across a public network of computers rendered tamper-proof by advanced cryptography. It rose to fame in 2009 when bitcoin, the first and most well-known crypto-currency, was launched. 

Calastone plans to move its network onto a blockchain next year.

Blockchain has been slated to transform several sectors across financial services. In the UK, for example, The Royal Mint, the government-owned bullion bar and coin producer, in partnership with CME Group, is using blockchain technology to transform gold trading as we know it today.

Using blockchain, the Mint is “tokenizing” gold ownership by creating a digital gold currency whose value is linked to the price of the precious metal stored at its vault in Wales.