angle-left null Enterprise Blockchain: Urgency Builds as Needs Intensify
Manager Insights

Enterprise Blockchain: Urgency Builds as Needs Intensify

Article Manager Insights Thematic Equity
April 2019
Enterprise Blockchain: Urgency Builds as Needs Intensify

Authors & Contributors

Erik A. Swords

Erik A. Swords

Scott Canning, CFA

Scott Canning, CFA

Over the last several weeks, a number of significant developments have unfolded across the enterprise blockchain space that we characterize as watershed events. In our opinion, these events indicate blockchain technology is gaining acceptance with regulators and is on the cusp of real-life applications across a wide variety of industries. We think 2019 could be a monumental year in determining how broadly this revolutionary technology is adopted—and where its impact will be greatest.

  1. Regulator Interest: In April, the Financial Times reported the US Security and Exchange Commission (SEC) deployed dedicated employees to assess if new technologies, specifically blockchain, could benefit small- and mid-sized investment management companies as the industry increasingly faces disruption and competition intensifies. At a recent industry conference, the regulator’s Division of Investment Management head Dalia Blass “acknowledged the strain that fee pressure and industry consolidation put on mid-size shops and vowed to help companies look for modern ways to cope.”1

    The SEC is keenly interested in supporting a marketplace that offers investors a diverse set of investment options and blockchain technology’s ability to remove fee-taking intermediaries as well as increase back-office efficiency could help smaller managers remain competitive. We view this initial step from the SEC as the first in a long line of cooperation with industry participants in moving toward more digital and efficient workflows. Longer term, we anticipate regulatory bodies will be the biggest supporters of distributed ledger technologies as it standardizes market information, improves their access to real-time market dynamics, and enhances their ability to monitor illicit behavior and implement compliance controls.
  2. Food Safety: Unfortunately, the United States is experiencing yet another E. coli outbreak with 72 people across 5 states now confirmed ill, with no source yet identified.2 We believe the regularity of foodborne illness outbreaks across a developed nation like the United States underscores the need for greater visibility throughout vulnerable food supply chains. The growing adoption of blockchain technology by food retailers and suppliers foreshadows that end-to-end tracking will eventually become the industry norm. A major supercenter’s food traceability initiative for suppliers of leafy greens made it clear that, to maintain representation across the global retailers’ shelves, farmers and distributors must leverage blockchain technology’s end-to-end tracing capabilities and accept accountability for the quality of their products and services. The benefits across perishable food supply chains are clear, and we anticipate blockchain technology will be widely deployed to reduce the impact of foodborne illness, increase consumer confidence, reduce waste and the impact on non-origin farmers, and increase the access to smaller international suppliers.
  3. B2B Payments: Within financial services, a major bulge bracket bank formally announced in February that its engineers had developed a digital dollar-backed “stable” token. We anticipate that this token will initially be rolled out for limited wholesale and treasury services use cases, and as proof points are reached, it will find further applications across business-to-business payments, accounts payable automation and potential consumer applications. In our view, as financial institutions increasingly recognize blockchain technology’s ability to digitally enhance balance sheet liquidity and concurrently become more comfortable with its security profile during proof-of-concept tests of mission critical operations, we will witness widespread adoption across the industry’s transactional infrastructure.

These announcements are clear signals of the technology’s many applications and underscore the need for enterprise blockchain solutions. Our team identified its disruptive potential several years ago and have been tracking its progress during our ongoing monitoring and analysis of the space. We expect similar announcements will continue to emerge throughout 2019, and correspondingly, should see acceleration in terms of adoption and new partnerships. We believe we are well positioned to capture these opportunities across the spectrum of blockchain implementations as the first actively managed enterprise blockchain investment strategy currently on the market.

Sources:
1Jill Gregorie, “SEC to Shops: Help Us Help You Adopt Blockchain, AI,” Ignites, April 2, 2019.
2Susan Scutti, “Mystery E. coli outbreak sickens 72 people in 5 states, CDC says,” CNN, April 5, 2019.

 

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