As understanding of Blockchain technology matures, forward thinking practitioners in almost every field are examining the set of tools the technology provides and asking “what would an effective implementation look like in my world?” It is during this examination that the questions, the roadblocks, the difficulties and the resistance are laid bare. Every technology goes thru this cycle, and it is not an outright rejection of the true believers’ optimism, it is the opening salvo in a conversation about what is possible versus what is probable.
I am not what one would call a “true believer”, my many years in fundamental investment analysis and portfolio management won’t allow for unbridled optimism. It is that same experience however, especially in the U.S. Corporate Bank Loan market and its’ antiquated and inefficient trade settlement process, that makes me most excited about what is both possible and probable in the application of Blockchain/DLT in the world of asset management. It is this excitement and experience that led to my becoming the Working Group Leader for the Asset Management Working Group.
The project I am undertaking, and writing about here in completion of my Certified Blockchain Specialist/Consultant coursework, is utilizing the knowledge and experience I have gained in financial services and Blockchain, to facilitate and drive the conversation concerning regulatory requirements for Asset Managers in the financial services space in the age of Blockchain. While my project is not a coding project that will bring into existence the latest breakthrough in the execution of smart contracts; as we learned in our GBA training, there are many steps in the successful deployment of any technology project. This effort is necessary because the regulations for much of the financial industry were largely written in the 1930’s and 1940’s. The regulations have been modified and updated to recognize and reflect automated methods of performing tasks that were originally performed utilizing pen and paper, but the application of Blockchain technology would dramatically change these processes.
“True believers” as well as practitioners recognize there are features and benefits of Blockchain technology that could negate the need to engage in much of the manual, time consuming, inefficient and costly activities financial asset managers must perform to meet their clients’ needs and fulfill their regulatory responsibilities. Some of the core features of Blockchain technology fundamentally alter how assets that are being exchanged move thru the “plumbing” of the financial services industry. It alters the very nature of transaction records that are created and that can be captured. This will require regulatory language that will allow regulated entities to meet their mandated document creation and retention and activities while utilizing the new technology. A concerted effort must be undertaken to educate those who regulate the industry about the technology’s benefits, how it will be implemented, what functions it will perform, what functions will be replaced and how the perceived risks of those changes will be mitigated. This step will be critical so that regulations can be amended to allow for this technology to be deployed, and its users will remain in compliance with the regulatory framework. Even the best technology in the world will sit “on the shelf” at regulated entities if the regulations under which it operates do not allow users to fulfill their regulatory obligations thru its use.
Despite having focused on it here, as Working Group Leader, I recognize that financial asset management is not the only version of “asset management” that can benefit from Blockchain/DLT. However, given the mission critical nature of trade and post-trade activities, the regulated nature of the industry, and the substantial capital already deployed against the technology, I do believe financial services will be at the forefront of the use of the technology. The principles of how the finance industry transforms its business process’ can serve as a model for all versions of “asset management.” The Asset Management Working Group will focus on all the industries that can benefit from improvement in “asset management.” I will utilize my experience and knowledge to bring best practices from this industry for discussion and application of these learnings to any and all industries that want to participate, I am sure there is much the finance industry can learn from others as well.
Please join me and your fellow GBA members in Washington D.C. at the Government Blockchain Association Conference to discuss this and all the opportunities to improve government and government facing industries thru the use of this very exciting technology. Looking forward to meeting all of you!