Survey: Blockchain is coming, but AMs know little about it

Added 26th September 2016

Asset managers in Asia-Pacific still know little about blockchain, which is expected to shake up the financial industry in five years, a State Street survey has found.

Survey: Blockchain is coming, but AMs know little about it

The survey polled 48 asset managers and 42 asset owners (public or private pension/retirement funds) in Australia, Japan, Hong Kong and Singapore earlier this month.

Among the asset managers, half of them said they don’t know enough about the potentially disruptive technology. About 15% believed blockchain is over-hyped, while the remaining 35% said it will have a significant impact on the financial industry.

Blockchain, derived from bitcoin, is a digital-encrypted transaction ledger hosted across a network of computers. It is seen as a huge disruptor of the financial industry because it promises to make transactions error free, provide virtually uncrackable security and eliminate third-party verification services, which are a multi-trillion dollar industry.

Nearly 70% of asset managers forecast blockchain will be widely adopted in five years’ time, which is a more optimistic view than that of asset owners.

The study also found that roughly 40% of asset managers believe blockchain will most likely be utilised privately, while another 40% said it would be adopted by most of the industry.

Still, 65% do not think the current form of blockchain meets the security standard.

Three-quarters of asset managers said they have not begun any initiatives to work on the technology. Only 4% said they have a dedicated team, while the rest (21%) said they partnered with external groups.

In terms of geographics, both asset managers and asset owners from Japan are the least bullish on blockchain.

Private blockchain networks

Hu Liang, State Street's head of emerging technology center who is based in California, said the bank is developing projects involving enhanced custody and securities lending and capital lineage tracking that can be applied to private equity reporting.

The projects are expected to be open for testing with a small group of clients in months, he said. But to scale up, it could take years, he added.

Multiple blockchains will co-exist based on business needs and performance needs, according to Hu.

"There's no one internet. When you go home, you have your own private network. When you work in a company, you have a company network. That's what we will see in the blockchain world as well.

"Once we get a standard, we will be able to connect these chains - the security chain, the cash chain, the syndicated bank loan chain - to all work together," he said.

The R3 blockchain consortium, which includes 60 global financial institutions such as State Street, HSBC, Goldman Sachs, AIA, as well as China's Ping An Group and China Merchants Bank, is working to set a protocol for all, he noted.


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