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ConsenSys reports Asset Management space ripe for blockchain solutions


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ConsenSys reports Asset Management space ripe for blockchain solutions

ConsenSys, a Brooklyn-based blockhain software development company, has released a report about the potential of blockchain technology to disrupt and enhance the morass of back office processes that support the asset management business sector. While material benefits are available for all participants, the report notes “the industry itself needs to transform if its to realize the full benefits”.

There have been several articles over the past year, which have highlighted the opportunities that a decentralized blockchain network could bring to the investment community and how its back office operates. The potential efficiencies had hinged upon the use of tokenization, a process that “converts the rights to an asset into a digital token, which are stored and managed on the blockchain”.

In an article in October of last year, the Softwaremill.com concluded that:

Just like bitcoin is significantly changing the financial landscape, a blockchain asset tokenization can make investing in real world assets far more convenient and efficient.

The new report from ConsenSys now moves the discussion from conceptual arguments to actual specific areas within the asset management space where blockchain solutions can make a real difference. It touches upon three areas: expanding a shrinking industry, custodianship, and fund administration. It also provides real-time examples of each.

Expanding a Shrinking Industry

The asset management industry has been undergoing change in many areas due to pressure on fees, the lack of active performance being greater than a passive modality, and an industry shakeout, a consolidation phase that could lead to a decline in participants over the next five years of roughly a third.

Tokenization can offer a means to create secondary markets for assets, lower costs, and lower barriers for access by using decentralized smart contracts. The report points to one real life example where ConsenSys assisted a capital company in Paris with a real estate asset valued at €26 million ($28.7 million). Tokenized shares are being used to fund the project, the largest of its kind to date in Europe.

Custodianship

The report speaks to a variety of centralized approaches, many patterned after the methods employed by Coinbase with its institution-level custodial services. According to reporters at CryptoBriefing:

ConsenSys is now moving into this space aggregating security reference data into an Ethereum-based platform called Truset.

The report avoids any discussion of potential uses of a decentralized blockchain solution on a public Ethereum platform. Financial institutions are very leery from a regulatory compliance perspective of any decentralized approach that is open to the public. Rules and regulations related to privacy and security are the primary concerns in this area.

Fund Administration

The final opportunity discussed is one where the greatest headway can be made to remove labor-intensive processes related to fund management like KYC compliance and reporting issues, which are ripe for automation. The report notes a leader in the field at the moment to be FundsDLT, and explains that:

The company offers a multi-module platform that manages different fund administration tasks such as onboarding, net asset value calculations, reporting and trader/order processing.

ConsenSys concludes that the benefits of blockchain technology across the asset management industry can only be achieved through collaboration and partnerships, “cautioning that the full benefits will only emerge once parties start to pool resources”.

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ConsenSys reports Asset Management space ripe for blockchain solutions

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