Today, Deutsche Bank Singapore published a report of a proof of concept with the Memento Blockchain to provide a platform for asset managers to issue tokenized funds. The DAMA (Digital Asset Management Access) project includes some novel features, most notably the ability to provide mass background customization.

The solution received a grant from the Monetary Authority of Singapore as part of its Financial Sector Technology and Innovation (FSTI) programme.

DAMA does not intend to disintermediate the process of issuing or managing funds. It still involves asset managers and transfer agents, with custodians taking on various roles, such as enabling digital cash.

However, a key feature is the ability to service all the different roles in fund management from a single solution.

Transfer agents would give an investor a digital identity as a soul-bound token. With the KYC data stored offline, this would allow the user to invest in any fund operated by the platform without the need to repeat the KYC process.

Blockchain data would be the primary source of investor ownership records, with an API allowing the transfer agent to maintain traditional records to comply with current laws.

Next-generation blockchain innovation

One of the promises of blockchain and tokenization is the ability to allow customization of funds. The mass customization described in the report has more to do with rebalancing. For example, if the initial fund has a certain ratio of stocks and bonds, changes in values ​​may require the asset manager to rebalance the fund to maintain those ratios. One type of customization is if the user chooses to keep the original ratio instead of rebalancing it. Mass customization is seen as a way for asset managers to attract and retain investors.

Tokens are issued on the public Ethereum blockchain and investors can subscribe in a number of ways, including minting a token directly or a user investing through a decentralized exchange (DEX). Memento has its own DEX, ComboSwap, as well as a crypto token.

One of the topics discussed in the report is the potential of cryptocurrency-based funds. Memento market research indicates growing interest from institutional investors, but they are held back by a reluctance to self-custody and a lack of choice in custodians of digital assets. That seems to be a key goal of the PoC because Deutsche Bank could play that role.

Meanwhile, the Deutsche Bank group’s interest in crypto and asset management extends to its asset management subsidiary DWS, which is reportedly considering the acquisition of digital assets.

Fund distribution companies such as Calastone, Allfunds and FundsDLT have been involved in the sector for several years. But in the last year, a number of key asset managers and administrators have shown interest, including KKR, Vanguard, abrdn, Hamilton Lane and Apex.