28 February 2020
The introduction of blockchain has played an integral role in terms of growing technology. This technology can be utilized for various purposes – Blockchain Mutual Funds being the one. Blockchain mutual fund is simply utilizing the technology of blockchain in mutual funds of finance stream.
Here are a few benefits of blockchain mutual funds:
Mutual funds sector needs a technology that conducts fast-paced operations, has features like automation, cost-effective, scrutiny, accessibility and transparency. Hence, blockchain mutual funds could provide a middle ground for investors to cash in blockchain mutual fund than risking their funds in the ever-volatile market. Blockchain mutual funds have the potential to increase its adoption, utilization and offer lower risk exposure.
Blockchain mutual funds technology can also initiate the value chain asset in streams like portfolio management, customer onboarding, trading, settlement, reporting, storing client’s information, immutability, to meet regulatory standards, provide security and protect from portfolio risk.
Blockchain mutual funds would also sort the troubles related to KYC. Through blockchain mutual funds it will be impossible to hack and launder money as all transactions related to the customer is simplified by the compliance process. Blockchain mutual fund will help connect the client to its asset management strategies with real-time customer data stored at a single secure location.
Blockchain mutual funds can aid to provide and cut down the traditional intermediaries involved. It will reduce or cut the involvement of paying funds for processing, management, etc. which leads to great returns through modest fees.
It is estimated by the HIS Markit that the Finance industry of the blockchain market would reach $462 Billion by 2030 while the financial sector has already reached $1.9 billion in 2017.
The financial sector including mutual funds holds a significant value wherein even a minor percentage of cost efficiency could gain significant value to the business for the companies that introduces mutual funds through blockchain technology.
Side pocketing in mutual funds was practiced and introduced to separate mutual fund houses with distressed debt amongst the rest of the portfolio, thus, to prevent distressed debt from harming the returns generated from the liquid and better-performing assets. Blockchain mutual fund could be the answer to seek maximum security. Blockchain could help to function as an early warning system, to identify flaws in the decision making, preventing scams and frauds, predict financial crisis.
The known Blockchain mutual funds by the means of alternatives are Blockchain ETFs, Exchange-traded blockchain investment products such as digital currency ETNs, Tokenized blockchain funds such as SPICE token, Crypto hedge funds.
However, following are a few of the drawbacks that blockchain mutual fund will have:
Blockchain mutual funds will lead to a decrease in human intervention as it is currently present. A machine will simply carry out all the operations regardless of the volatility in the market.
The traditional mutual fund is backed and regulated by a Central Authority which will not be partially the scenario with blockchain technology as it consists of a decentralized system.
Blockchain mutual fund will, of course, need the blockchain technology as the name suggests, which means that there will be effects on the environment. It needs a lot of computing power which thus requires energy leading it to a vicious cycle between money and the environment.
Because blockchain technology and mutual fund are so complex subjects among themselves that understanding of blockchain mutual fund is going to be too much for most people to have the will to initiate.
Blockchain mutual funds could be cumbersome due to its technology’s networks.
A need of acceptance of Blockchain mutual funds will also be required across globally which a lot of countries are speculating on.
Is blockchain mutual funds the future investing?
If something is so good to be true then it brings along some troubles brewing too.
However, it could lead the blockchain mutual fund a worth try of its future investing!