Investors need lower costs from asset managers' crypto push
A number of high-profile fund managers are becoming less shy about their crypto ambitions. The acid test is whether this lowers costs for investors.
Something that has been apparent for many years to fintech watchers, that blockchain technologies will underpin a major part of the future of financial investment markets infrastructure, is starting to show mainstream takeup.
While asset managers have traditionally been largely conservative when it comes to crypto and the blockchain technology that underpins it, that seems to be shifting.
This week several very large asset managers showed their growing interest in digital assets and blockchain, concluding a summer of deal-making for City and Wall Street firms amid the biggest sell-off in currencies like Bitcoin and Ether on record.
UK-listed fund manager abrdn, which manages about £58bn of investors’ assets, revealed that it is now the largest shareholder in Archax. The company provides institutional investors by providing a digital asset exchange as well as brokerage and custodian services, allowing them to trade cryptocurrencies and other digital assets.
Archax was the first crypto platform to be regulated by the Financial Conduct Authority as a digital securities exchange and custodian and brokerage. It was also the first firm to be listed on the FCA’s Crypto Asset Register as a VASP (Virtual Asset Service Provider).
The move follows others such as BlackRock and Schroder's respective moves into crypto in recent weeks.
For anyone with a cautious but optimistic view on crypto and blockchain, with no interest in shilling digital currencies or overturning the entire financial system, this makes sense.
Not that you would necessarily know it as a pension or ISA customer but the buying, holding and trading of funds and securities is immensely complex, fragmented and ultimately dominated by a few players who utlise their scale and market expertise.
It is also from a customer perspective, too slow and expensive. Something that certainly is apparent.
Blockchain can, potentially, fix this and offer a swifter, cheaper alternative to the existing ‘plumbing’ of investing in pensions, ISAs or single stocks and other securities.
Greater transparency, speed and less trading friction are the benefits outlined by abrdn’s CEO Stephen Bird as to why he is so excited about the use of digital and tokenised securities with same-day settlement and hence the investment in Archax.
The acid test of blockchain's ultimate value though is whether it lowers costs for investors or just adds to the bottom lines of the world’s largest money managers.