Blockchain
DTCC partners with Chainlink and JPMorgan to pilot blockchain integration for fund data
(Kitco News) – While news headlines focus on the Bitcoin spot (Bitcoin) exchange-traded fund (ETF) flows and the latest institutions to disclose exposure to BTC ETFs, in the background, financial services infrastructure providers are working to integrate blockchain technology into their systems.
According to a new relationship from the Depository Trust & Clearing Corporation (DTCC), the company recently completed a pilot program – called Smart NAV – in collaboration with Chainlink (LINK), which was “designed to explore an extension of a DTCC service, Mutual Fund Profile Service I (MFPS I), the industry standard for transmitting “Price and Tariff” data (referred to as “NAV data”).”
DTCC’s Mutual Fund Services business currently operates MFPS I, an industry standard that provides fund companies with an automated solution to provide daily pricing and distribution rates to thousands of customers for tens of thousands of mutual fund securities.
In the current process, DTCC connects funds/service providers and distributors (or other interested parties), collecting price and fee data via message queue (MQ) and file-based methods, aggregating and disseminating it at regular intervals.
The Smart NAV Pilot was designed as a digital extension of the existing MFPS I service, seeking to extend and complement its current capabilities.
“In recognition of the increased industry focus on mutual fund tokenization, DTCC has identified an opportunity for on-chain pricing and fee data that can serve as a key driver in exploring new ventures,” he said the DTCC in a publication. “Taking a ‘chain-agnostic’ approach (i.e., the ability to spread NAV data across (virtually) any blockchain) would be critical to enabling other use cases to build on the foundation of Smart NAV.”
A total of ten market participants – including American Century Investments, BNY Mellon, Edward Jones, Franklin Templeton, Invesco, JP Morgan, MFS Investment Management, Mid Atlantic Trust d/b/a American Trust Custody, State Street and US Bank – they joined DTCC and Chainlink in the pilot.
They worked together to “evaluate the feasibility and value to the industry of providing a DLT-based pricing and fee dissemination solution that can enable new benefits and support experimentation in the asset management space,” the release said.
The results of the pilot showed that providing structured data on-chain and creating standard roles and processes made it possible to “integrate core data into a multitude of on-chain use cases, such as tokenized funds and smart contracts “mass consumers”, which are contracts that contain data for multiple funds”.
“This capability can support future industry exploration and can also power numerous downstream use cases, such as brokerage portfolio applications,” the DTCC said. “Additional benefits include real-time and more automated data dissemination and integrated access to historical data.”
The simplest application of Smart NAV is to provide the ability to make reliable, verifiable data available on “virtually any blockchain network to support the use of that data in business workflows,” they said.
During the pilot, DTCC served as the provider of that data as well as the governor of the on-chain solution that stores that data, while Chainlink’s CCIP served as the interoperability layer. “The key capabilities explored are applicable to infinite use cases that could ultimately fuel leaner and more efficient operational processes,” the report states.
“Based on these findings, we see an opportunity to potentially expand the scope of the pilot to explore how the technical capability leveraged in the pilot could power a broader range of use cases beyond the dissemination of pricing and tariff data and through a greater number of blockchains,” concluded the DTCC.
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