Blockchain technology – a distributed database used to immutably timestamp and record transactions – is most commonly thought of in the single context of digital currencies, yet its applications are varied and limited only by the objectives of the adopting users. There are many more practical applications of the technology that could greatly enhance the efficacy of the financial sector while also dramatically reducing its overhead expenses. In particular, the technology could help private funds streamline their operations in various ways while simultaneously improving their compliance protocols. This second article in our three-part series about blockchain in the financial sector discusses various potential uses of blockchain technology, such as reconciling trades and onboarding investors, to improve private fund operational efficiencies and compliance efforts. The first article
explained how blockchain functions and provided examples of how major elements of the financial industry (e.g.
, derivatives trading and repurchase agreements) are already incorporating the technology. The third article
will explore how and when the private funds industry will adopt the technology, while presenting issues related to that implementation. See also “Are New York’s Cyber Regulations a “Game Changer” for Hedge Fund Managers?
” (Jun. 14, 2017).