Irish Funds Collaborates with Deloitte To Complete Proof of Concept for ‘RegTech’ Blockchain
Fund management association Irish Funds announced that, together with financial services consultancy firm Deloitte and several global asset servicing institutions including Deutsche Bank, Metzler, State Street, and Northern Trust, it had completed a proof of concept for a regulatory reporting blockchain called ‘RegChain.’
The proof of concept was built using the Ethereum blockchain and IPFS (InterPlanetary File System) and tested key blockchain functionalities for the purpose of recording transactions, the management of reporting using smart contracts and increasing transparency for compliance oversight purposes. The proof of concept also included a cost-benefit analysis of using a blockchain-based system for regulatory reporting.
The projects were targeted at Resident Investment Fund Returns (Money Market & Investment Funds Returns Reporting or ‘MMIF Reporting’) and culminated in the development of a blockchain proof of concept. The proof of concept leverages smart contract functionality to build a platform for financial regulatory reporting that can be accessed by both the reporting company and the financial regulator.
The proof of concept resulted in the main findings for the participating parties including:
- The blockchain is an excellent technology to record data in a secure manner, improve data integrity and quality, and increase the efficiency of regulatory reporting.
- The blockchain can aid in managing regulatory change request as well as simplify the addition of new regulatory reporting requirements.
- The blockchain increases the safety and security of data sharing and transferring in the regulatory reporting process.
- The blockchain proof of concept solution can incorporate other regulatory reports as well.
- Blockchain projects need to be built to fulfill industry requirements and must be developed for varying business needs to be successfully implemented industry-wide.
Irish Funds CEO, Pat Lardner, stated: “The successful completion of this project is an important first step in demonstrating the power of Blockchain for regulatory reporting and industry collaboration around innovation. This foundation will enable additional development and progress to be made with other key stakeholders and confirms Ireland’s place a leading location for FinTech globally.”
While David Dalton, Head of Financial Services at Deloitte Ireland, and sponsor of Deloitte’s EMEA Grid Blockchain Hub commented: “Deloitte are delighted with the progress made by the collaboration with Irish Funds and funds industry participants. We look forward to seeing how we bring this to production and extend blockchain further into the funds industry.”
Since the 2008 financial crisis, financial regulators have stepped up their game and enhanced regulations, such an increased capital adequacy requirements and the Dodd-Frank Act, to prevent banks from taking too much risk, which could potentially lead to financial panics as it did in 2008. Consequently, we have witnessed an increase in investment by financial institutions in compliance and regulatory reporting systems to comply with new regulatory requirements.
RegTech (Regulatory Technology) has, therefore, become a ‘hot’ area within financial services and the blockchain, with its ability to secure record, track and transfer data, is a great technology to reduce costs and improve efficiency in this important area within the financial industry.