BNP Paribas Securitizaties Services, part of BNP Paribas - the largest bank in France and one of the largest banks in the world - says blockchain and distributed ledger technology (DLT) and tokenization are radically changing the model for distributing and serving mutual fund clients.

BNP Paribas has been involved in blockchain technology for years, including digital payments, CBDCs and digital assets in general. BNP Paribas recently (2021) partnered with Allfunds Blockchain to provide a proof of concept for UCITS fund tokenization, providing a better understanding of the digital asset ecosystem.

Paul Daly, Head of Distribution Products and Solutions, and Carole Michel, Senior Global Product Manager for Distribution at BNP Paribas Securities Services, say the interest in digital assets and blockchain "has the potential to become the most transformative technology in the fund industry, enabling digitization and tokenization of fund shares, reducing inefficiencies in fund distribution."

Mutual fund companies rely on long and complex distribution chains that make it difficult to build investor relationships and control distribution costs. Blockchain use cases present an opportunity for these funds to target investors directly and expand their distribution network. Investors can now subscribe to tokenized assets via a distributed online ledger and store tokens in electronic wallets they own and operate, moving the investment industry closer to a self-service model.

In addition to lower real-time transaction costs, automation and improved reporting with sharing of key data are just some of the features that speak to the full implementation of blockchain technology in the mutual fund industry. A shorter settlement cycle will increase liquidity, and the cash chain will enable true delivery versus payment (DVP) between cash tokens and share tokens, increasing operational efficiency by eliminating cash reconciliation and payment chasing processes says BNP Paribas Securitizaties Services.

In addition, blockchain will simplify AML/KYC processes, as they will inevitably be built into smart contracts - a key feature of DLT. This will replace the "decentralized off-chain AML/KYC process," ownership changes will be recorded automatically, eliminating the need for analog services. Analysts say the digital asset ecosystem will grow significantly over the next few years. They predict that in the near future, the mutual fund industry will adopt a hybrid model providing a subscription option via blockchain platforms alongside the traditional method. Service providers will have to adapt, and BNP Paribas itself will actively participate in this transformation.

The processes BNP Paribas mentions are already happening, for example, in Luxembourg , where selected funds collect blockchain orders and manage them like orders from any other distribution channel providing the same level of service. The DLT fund opens a register under the name of the blockchain platform or client/distributor, which is managed through the distributor's standard onboarding process. This is how Luxembourg funds from the IZNES investment platform, based in France, and Funds DLT, based in Luxembourg, operate.

Read more at https://www.crowdfundinsider.com/2022/03/188433-bnp-paribas-securities-services-explains-how-blockchain-tokenization-will-drive-value/