The Great Custodian Bank Shake-up Part 1: Blockchain to Rewire Custodial Operations - Finextra
Disruptive digital technologies such as blockchain and distributed ledger technologies (DLT), Robotic Process Automation (RPA), and intelligent automation systems such as cognitive computing tools and decision support systems using machine learning (ML) algorithms can help custodian banks address these challenges. Market participants can come together to form a common platform underpinned by blockchain technologies, wherein issuers publish the securities reference data for the use of all the members.
Blockchain technologies can be used to address this wherein a custodian in a participant’s home market will accept the collateral and issue equivalent virtualized tokens to the participant on the blockchain platform. Processing voluntary actions and proxy voting on a blockchain platform can deliver multiple benefits - complete elimination of error-prone, manual consolidation efforts at multiple stages, reduced costs, and significant time positions between custodians, depositories, and other foreign sub-custodians entails huge manual effort, which can be eliminated by sharing position updates between custodians and depositories through a blockchain ledger sponsored by the depository.
