Arca, a compliance-first digital asset platform, has distributed a white paper on Blockchain Transferred Funds or “BTFs” as an alternative to Exchange Traded Funds (ETFs).
Arca states that the “finance industry is at a critical inflection point” as traditional finance (Tradfi) has not kept pace and blockchain is an opportunity for a “revolutionary new era” in finance.
Arca describes blockchain technology as establishing a “changing of the guard” because blockchain is better at managing assets. By combining blockchain with ETFs, a popular retail investment sector, improvements in transferability and time may be accomplished.
The first ETF was introduced in 1993 and, over time, has supplanted a good portion of the expensive mutual fund industry. Arca notes that ETF inflows doubled in 2021 topping $900 billion.
The white paper explains:
“The ETF—an open-end, exchange-traded investment vehicle—evolved from the mutual fund’s commingled investment framework as a new security that birthed an entire industry. ETFs offer a professionally managed pooled investment product with lower fees, accessibility, transparency, intraday liquidity, tax advantages, and better-targeted securities baskets that can represent the broad market. It took nearly 2 decades for ETFs to achieve widespread adoption because skeptics challenged their development, regulatory approval took 5 years, and market adoption took another 10 years. Ultimately, the ETF enhanced the pooled investment structure and resolved many constraints of the original investment funds. Today, it is a $9 trillion industry.”
The BTF leverages technology to improve upon the ETF market by boosting efficiency and cost savings – something that can be beneficial to investors. A BTF can be an investment vehicle that is held directly by the investor as opposed to an intermediary as technology can manage transfers/ownership etc. A survey by Arca indicates that the vast majority of respondents believe that within 5 to 10 years most securities will be digital and managed by blockchain.
Most people will agree with Arca’s analysis as digitization of securities, or tokenization, is a win for both sides of the equation. We just need regulators and industry participants to catch up with the future – Arca is a firm that is at the forefront of this change.
You may review the white paper here.
