Why we invested in Funds on Chain

Dec 22, 2023


5 mins

If history is any indication, financial innovation is often the result of catastrophic weather events, wars, or terror attacks.

When the US airspace was closed in the weeks after Sep 11, 2001, the physical clearing of paper cheques became impossible. Subsequently, electronic scans of cheques were allowed.

In 2012, the Depository Trust & Clearing Corporation, which houses the majority of U.S. stocks and bonds, found one of its securities vaults flooded during Hurricane Sandy. Nearly 1.7 million security certificates stored in a lower Manhattan skyscraper were damaged. Subsequently, digital certificates became a thing.

The financial industry, traditionally more tortoise than hare when it comes to innovation, often needs a push to move forward.

Funds on Chain, founded by Volker Braunberger and Johann Hainzinger, is gearing up to be that forceful yet friendly nudge.

The duo's mission is to take the fund industry into the distributed ledger area.

The incentive for their clients?

€2-3 billion in saved fund administration costs across the EU. Annually.

In today's world of razor-thin margins, that should be an idea with enough gravitational pull to get the attention of fund managers.

Our journey with Funds on Chain has been a lesson in patience and in the making for over two years.

The company offers a SaaS-based workflow engine for the end-to-end handling of digital fund units in the financial services industry.

This isn't just a facelift for the aging paper-based process. It is a full digital transformation, promising cost reductions, near-time settlements, and many customer insights for fund issuers.

FoC's potential has been demonstrated through two successful proofs of concept: BNP Paribas in April 2022 and Metzler Asset Management in May 2023.

We believe that the technological migration from a centralized clearing to blockchain technology in the fund industry is inevitable.

It is comparable to the move from paper-based clearing and settlement in the 60ies to computerized trading - which still requires centralized clearing even today.

Funds on Chain's edge lies in its seamless integration of the entire trading stack into a single, participant-agnostic blockchain system.

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The law on electronic securities, “eWpG”, passed in June 2021, prepared the way for establishing electronic securities as an alternative to securities issued via a physical certificate, ultimately leading to a faster and more cost-efficient capital market.

Volker and Johann, with over two decades in the fund industry, are not just removing middlemen – they're addressing several inefficiencies along the entire value chain.

The fact that any securities still exist in physical form is a clear sign of the industry's need for a radical makeover.

As self-evident technological change looks in retrospect, it takes courageous founders like Volker and Johann, obsessed with an idea and relentless in their execution, to make it happen.

Never waste a good crisis.

Visit fundsonchain.com to learn more.

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