Top UK Asset Management Firms Team Up to Explore Blockchain Technology

The consortium represents asset managers' latest move into territory where financial institutions have invested significant energy. Forty-two banks joined forces through R3 CEV to develop blockchain systems for finance. In January, eleven members of that group completed a test. Barclays, Credit Suisse, Commonwealth Bank of Australia, HSBC and Wells Fargo participated. They hooked their systems to a shared ledger built on Ethereum technology, running through Microsoft Azure on a private network. The participants simulated moving value across the ledger using digital representations of assets, with no middleman required.

The Linux Foundation backs another track. Its Hyperledger initiative counts some of the world's largest technology and finance companies among its members, all working toward an open-source blockchain built for business deals. Digital Asset Holdings sits in that group. The firm, run by Blythe Masters, an ex-JP Morgan banker, builds ledgers for financial services firms. Its stated aim is boosting how fast, how secure and how compliant transactions can be. Digital Asset is wrapping up a funding round worth $60 million, with backing from Citi, BNP Paribas, IBM and Goldman Sachs.

Asset managers lag behind banks in committing resources to blockchain. Amin Rajan, who leads Create Research, explained the hesitation. "Asset managers are wary of transformational changes, since they are dealing with other people's money," he said. Systems failures can cause huge reputational damage. EY's Alex Birkin sees a pattern of caution. "A lot of asset managers are observing [the work that is being done to develop blockchain technology], rather than committing a lot of their money," he said.

Bitcoin has complicated the picture. The digital currency drew intense scrutiny and suspicion. Angus McLean, a partner at Simmons & Simmons law firm, pointed out the connection. "The stigma around bitcoin has distracted people from the benefits of blockchain technology and the applicability of blockchain. Had there not been the stigma around blockchain, people would have realized faster how useful the technology could be," he told the Financial Times.