Calastone Investment Network Will Put All Mutual Fund Trades on Blockchain

Calastone Investment Network Will Put All Mutual Fund Trades on Blockchain

The London-based fintech company Calastone announced it will overhaul its entire settlement system by moving it on a blockchain, according to a Reuters report. The company provides financial services for such industry giants as JP Morgan Asset Management and Invesco alongside 1,700 other companies. Calastone expects to complete the transition by May 2019.

Blockhain will help to save billions

At the moment, Calastone still settles the funds manually, with 9 million monthly messages and transactions that are worth around £170 billion between various parties. A firm, interested in buying into a fund, has to send no less than three separate messages, which often involve inputting the same information. Calastone is hopeful that the distributed ledger technology will help to improve such time and resource-consuming operations.

It is estimated that the switch to blockchain-based databases could save the entire global fund industry as much as £3.4 billion per year. Currently it is stifled by increasing costs due to stricter regulation, following the 2008 financial crisis. In an industry where efficiency is of utmost importance, the messaging process is already dated and needs an update, for which the distributed ledger technology is perfect for.

According to Calastone chief marketing officer Andrew Tomlinson, “The more you can automate, the more you de-risk, the more you streamline, the more you speed up.“ Speaking to Financial Times, Calastone CEO Julien Hammerson said that the change will “transform the way in which funds are traded.“ The chief executive added that funds are “hampered by continually rising costs and threat of competition, ultimately rendering the current system economically and operationally unsustainable.“

Enterprises are eyeing blockchain

Calastone first tested blockchain in 2017, completing the first phase of proof-of-concept blockchain trial. At the time the company said it will move the system to a private blockchain in 2019 and it seems that the firm is staying true to its word. Citing data from a 2016 Deloitte study, Calastone claimed that global mutual funds could save more than $2.5 billion by relocating their operations to blockchain.

Other asset funds are also looking into distributed ledger as a way to slash costs and increse efficiency. BNP Paribas Asset Management and Ostrum Asset Management have already completed fund transactions tests using blockchain. Last month a number of investors including Standard Life Aberdeen and Columbia Threadneedle formed a platform, focused on impact funds that will use blockchain, according to Financial Times.

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