Blockchain's Effect on Investment Management

Lots of "disruption" talk regarding blockchain technology and financial services recently but as usual, the focus has been largely sell-side and payments focused. Pensions & Investments' recent article begins to explore how blockchain may impact the buy-side and the custody market more specifically.

• Potential and Development: Blockchain technology, initially popularized by bitcoin, is being explored for a wide array of financial services applications, including institutional investing and back-office functions, with significant interest from major financial institutions and banks.
• Consortium Efforts: A consortium of 22 banks, including State Street, Goldman Sachs, and others, is actively studying and developing blockchain applications for trade finance, securities finance, derivatives, and more, emphasizing the technology's potential to automate and enhance efficiency in financial operations.
• Security and Adoption Challenges: While blockchain offers enhanced security through distributed data validation, there are concerns about the security of private networks. The technology's broader adoption faces challenges, such as determining incentives for participants and integrating blockchain into existing financial systems.