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BNP Paribas says more work needed on blockchain

By Goh Thean Eu   
February 22, 2018

Paris-based BNP Paribas Securities Services believes blockchain technology requires more work before it can be widely used by the company.

Blockchain technology is a digitised, decentralised, public ledger of all cryptocurrency transactions.

One of the key areas that needs more work is its "integration with existing market practices and stakeholders", according to Johann Palychata, head of blockchain at BNP Paribas Securities Services' digital transformation division.

"Blockchain is a technology and the replacement of a settlement system must be carefully designed in order to improve efficiency or offer new services to its users," Mr. Palychata tells Asia Asset Management (AAM).

BNP Paribas Securities has put in “huge efforts” to enhance the capability of blockchain.

"A couple of years ago, it could only deal with basic functions for simple financial instruments. Since then, it has evolved to allow more complex instruments and more advanced functions," he says. "The technology will continue to be enhanced in the coming years to enable large scale use in our organisation."

Mr. Palychata adds that regulatory changes are also necessary to allow wider usage of blockchain technology.

BNP Paribas Asset Management announced in January that it had successfully completed a full end-to-end fund transaction test using blockchain technology.

The test was conducted on Fund Link, the company’s blockchain programme, and FundsFLT, a blockchain-based platform.

FundsFLT was developed by Fundsquare, a subsidiary of the Luxembourg Stock Exchange, InTech, a subsidiary of Luxembourg telecommunications firm POST Group, and KPMG Luxembourg.

According to Pierre Mottion, global head of transfer agent and fund dealing securities products at BNP Paribas Securities Services, the test demonstrated that Fund Link was able to connect with other block chains, opening the door to a new model of interoperability, and it marks a key milestone for fund distribution.

"We are looking to perform other tests with other market initiatives, but also to enrich the functionalities implemented within this new model," Mr. Mottion tells AAM.

He points out that there is potential for more technology innovation in the fund management space, but that the industry, including its regulators, "must adapt to these changes and respond to the needs of a new generation of investors".

"New technologies are now allowing the emergence of new models, and this test is opening the door to a brand-new fund distribution model, removing trade barriers and simplifying the operating model," he says.