Use Case : Custody
HOW WILL STACS BLOCKCHAIN
IMPACT THE CUSTODIAL FUNCTION?
EASE IN MANAGING CORPORATE ACTIONS
Mandatory events and distributions can be managed via STACS smart contracts embedded within the securities.
The management and communication of corporate actions events have long been said to be a pain point of the custody industry. STACS Blockchain provides a feasible alternative to the traditional processing of corporate actions. Institutions using STACS Blockchain can experience an ease in managing mandatory events and distributions through smart contracts.
STACS Blockchain’s audit trail for proxy voting is also beneficial for asset managers at Annual General Meeting (AGM)s, and by association, the custodians who safeguard these securities. As such, blockchain can certainly improve the services provided by Custodians in the current landscape.
Custodians and CSDs still have a role to play in a blockchain environment.
QUALITY OF SECURITY REFERENCE DATA
A shared source of data powered by STACS Blockchain will keep the quality of security reference data accurate and up-to-date, to run business-critical processes and analytics, thereby improving custodian’s services and cost efficiencies.
Industry players such as Custodians, Asset Managers, Fund Managers and counterparties have greater visibility of the security reference data, for better decision-makings in their pools of investments in securities (the asset side of their balance sheet). When adopting STACS, the buy-side players will better manage investors’ holdings in their funds via units created as tokens on a fund ledger.
Institutions such as Custodians and Banks that have a shared source of data have a lesser need for reconciliation of security reference data between the middle and back offices. In this manner, STACS blockchain provides a cost-effective manner of syncing information between different business units and operating in the industry.
Complex events structured simple.
NEW MARKETS: CUSTODY OF DIGITAL ASSETS
For new issues, assets are issued directly onto the asset ledger. In fact, STACS securities themselves could be unbundled so that the individual cash flows, and the rights they encapsulate, could be transferred separately. Here, the assets are held by a form of the wallet provider recording the final beneficial owner.
STACS Blockchain provides institutions with the potential to provide new products in a broadened marketplace through digitisation, thereby differentiate themselves from competitors.
Custody solutions for digitised assets are fast becoming a pressing item on the agenda for traditional Custodian firms as new market entrants are emerging looking to lead in the space. In the market, there is increasing demand for a traditional, established custodian to provide custody of digital assets.
The key benefit for traditional Custodians is both their strong brand name and regulated status. The industry has yet to see a market leader for digitised assets emerge in the space, which has the potential for institutional money to be flowing into the new model of custody offerings. Given the role Custodians play for traditional securities, we see the potential for them to also play a pivotal role in the custody of not only traditional funds, but any kind of digitised asset, as a new service to both traditional and new market investors.