Calastone, an investment funds transaction network, said on Monday it will shift its entire system to blockchain in May, a move that could slash costs for the sector by billions of dollars a year.
The change will help “transform the way in which funds are traded”, said Julien Hammerson, chief executive at Calastone. He said funds were “hampered by continually rising costs and a threat of competition, ultimately rendering the current system economically and operationally unsustainable”.
Calastone, which provides services to over 1,700 firms including JP Morgan Asset Management, estimates the plan could help the industry save up to £3.4 billion (or $4.3 billion) in fund distribution costs, excluding the U.S. market.
As Reuters notes, the incumbent system requires three separate messages to be sent digitally between enterprises whenever they buy into a fund: the first to place an order, the second as a receipt, and the third to confirm the price. “The more you can automate, the more you de-risk, you more you streamline, the more you speed up,” Andrew Tomlinson, chief marketing officer at Calastone, told Reuters.
Blockchain was tested by the firm in 2017 to buy and sell mutual funds and the firm said the results were satisfactory, using multiple data centers and clouds to protect the system.
