Fidelity and Partners Bring $6.9B Fund to Blockchain

In A Nutshell

Fidelity International and Sygnum Bank have embarked on a pioneering initiative with Chainlink to digitize and make the Net Asset Value (NAV) of Fidelity’s Institutional Liquidity Fund, worth $6.9 billion, available on blockchain in real-time. This marks a significant stride towards integrating traditional financial metrics with blockchain technology, offering improved transparency and efficiency for institutional investors.

Understanding the Partnership

The collaboration between Fidelity, Sygnum, and Chainlink is set to revolutionize how fund data, specifically NAV, is accessed and utilized. NAV, a critical financial metric that calculates a fund’s assets minus liabilities divided by outstanding shares, traditionally updates after the trading day ends. This partnership promises real-time, onchain accessibility of NAV data, enhancing the decision-making process for investors and providing a transparent view of a fund’s value at any moment.

Sygnum, having recently tokenized $50 million from Matter Labs’ treasuries, demonstrates the growing trend of moving traditional financial assets onto the blockchain. Fidelity’s Institutional Liquidity Fund, known for its variety of money market sub-funds, becomes a prime candidate for showcasing the benefits of fund tokenization and real-time data transparency.

Chainlink’s Role and the DTCC Pilot

Chainlink, a leader in providing secure and reliable data feeds for smart contracts on the blockchain, is at the heart of this initiative. Its technology enables the seamless integration of real-world data, like NAV, onto the blockchain. Moreover, the recent DTCC pilot, which utilized Chainlink’s Cross-Chain Interoperability Protocol (CCIP), underscores the potential of onchain data in enhancing the functionality and reach of traditional financial services, including mutual funds.

The DTCC pilot aimed to extend its Mutual Fund Profile Service I (MFPS I) for transmitting NAV data onto the blockchain. The promising results highlight the potential for expanding this technology across a broader array of use cases and blockchains, signifying a significant leap towards the widespread adoption of blockchain in the financial industry.

Implications for the Asset Management Industry

This collaboration is more than just a technical integration; it represents a shift in the asset management landscape. Sergey Nazarov, co-founder of Chainlink, believes that tokenized funds offer substantial efficiency benefits over traditional methods. As such, the move towards blockchain and real-time data accessibility could set a new standard in asset management, emphasizing transparency, efficiency, and the potential for broader financial inclusion.

Our take

The partnership between Fidelity, Sygnum, and Chainlink is a testament to the evolving landscape of the financial industry, where traditional and digital assets converge. By bringing NAV data onchain, this initiative not only enhances the transparency and efficiency of financial operations but also paves the way for a new era of asset management.

Tokenization and real-time data feeds are set to become the backbone of the financial industry, promoting trust, transparency, and more informed decision-making. As we witness the fusion of traditional finance with blockchain technology, the potential for innovation and growth in asset management is immense. This collaboration is a significant step forward in realizing that potential, indicating a promising future for both the blockchain and financial markets.