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May 25, 2024
DTCC uses Chainlink for Blockchain Mutual Fund Data
The Depository Trust & Clearing Corporation (DTCC) recently announced the successful conclusion of its Smart NAV pilot project, which used Chainlink’s advanced technology to upgrade its Mutual Fund Profile Service I (MFPS I). This project represents a big step forward in integration Blockchain technology in financial services, with the aim of simplifying data sharing and consumption.
Using Chainlink’s Cross-Chain Interoperability Protocol (CCIP), the DTCC was able to effectively transform and transmit price and fee data across various Blockchain networks. This chain-agnostic approach enables the seamless integration of mutual fund data into Blockchain-based platforms, thereby improving overall efficiency.
The pilot project, known as Smart NAV, attracted participation from several major industry players, including American Century Investments, BNY Mellon and JPMorgan. This involvement highlights the broad interest and spirit of collaboration within the financial sector towards exploring the potential of Blockchain technology.
One of the key outcomes of the Smart NAV pilot was the demonstration of the practical use of on-chain data in multiple applications. He showed how smart contracts it could automate data routing and ensure a standardized approach to data dissemination, which is vital to avoid future fragmentation of the industry. Chainlink’s CCIP has been instrumental in this process, providing a reliable solution for cross-chain data transmission.
Participants in the pilot project reported several benefits, such as the reduction of manual processes and the potential for new blockchain-enabled financial products. The release of the pilot report also had a positive impact on the value of Chainlink’s native token, LINK, which saw a significant increase of 21% against the US dollar shortly after the report’s release on May 16.
With over 50 years of experience as a trusted financial market infrastructure (FMI), DTCC is ideally positioned to support the financial sector’s exploration of digital assets. The Smart NAV pilot is part of DTCC’s broader efforts to innovate in financial services through the use of digital assets and Blockchain technology.
In response to the growing interest in mutual fund tokenization, DTCC recognized the opportunity to provide on-chain pricing and fee data, which could be crucial for new ventures. Maintaining a chain-agnostic attitude, DTCC aimed to distribute net asset value (NAV) data across multiple blockchains, facilitating the development of new use cases.
The pilot project involved extending the capabilities of DTCC’s Mutual Fund Profile Service I (MFPS I), the industry standard for transmitting NAV data. In collaboration with Chainlink and ten other market participants, DTCC explored the feasibility and value of a distributed ledger technology (DLT)principle-based solution for pricing and tariff dissemination. The goal was to integrate fundamental data into various on-chain use cases, such as tokenized funds and bulk consumer smart contracts, to support future exploration in the asset management industry.
The results of the pilot project indicate that providing structured data on-chain and establishing standard roles and processes can support a wide range of downstream applications. These include brokerage portfolio applications and other business workflows, which benefit from automated data dissemination and access to real-time historical data.
Smart NAV’s core capability is to make reliable and verifiable data available on any Blockchain network, supporting its use in business workflows. DTCC acted as the data provider and supervisor of the on-chain solution, while Chainlink’s CCIP facilitated interoperability. The success of the pilot suggests that this approach could be applied to a broader range of applications beyond simply spreading price and fee data across multiple blockchains.