The potential impact of the blockchain technology on the financial markets and the fund industry

Abstract

The financial industry and most notably the fund and banking sectors have been relatively skeptical when it comes to implementing new. By saying this, I do not mean that they are against new developments like smartphones, applications and so on. I mean it with regards to technology, which is able to redefine their way of functioning. Of course, the industry has changed over the course of the last decade, most importantly by incorporating the internet, but it is only a tool used to execute the same kind of processes as before. The blockchain technology has the potential of changing that.

Even though blockchain is tightly linked to bitcoin and other cryptocurrencies, the technology is able to function independently of those assets. The industries in which the technology could be implemented are numerous, but its main field of application is most certainly going to be the financial sector, more precisely the financial markets and the fund industry. The latter is known for its high number of intermediaries, whose role could either be replaced or redefined by the use of the blockchain. The exact consequences are currently hard to predict since they depend on numerous factors, one of which being an adapted regulatory framework.

During my research process, I conducted interviews with some of the industries’ leading entities in order to gain insight on their vision regarding the blockchain technology. The result of those interviews leaves no doubt that the technology is going to play a role in the future of the industry. The most important impact will most likely be felt in the fund industry. The entire process of subscribing to a fund can be redefined by the blockchain in the coming years. Different proofs of concepts have shown that it is feasible to link the investor directly to the asset manager of a fund by using blockchain based applications.

The possibilities of implementing the blockchain are nearly endless. Its success is going to depend on the industrie’s willingness to adapt and its ability to overcome potential difficulties.