Melon protocol partners with investment management provider AK Jensen to work in a UK regulatory sandbox

Avantgarde Finance, the lead developers behind the Melon protocol, and AK Jensen a hedge fund platform have partnered to test out a compliant blockchain-powered hedge fund. They have submitted an application to test their technology in the sixth cohort of the Financial Conduct Authority (FCA) sandbox. Their goal is to demonstrate how smart contracts can automate back and middle office processes to eliminate the need for various financial intermediaries as well as how this could still be done in a compliant manner.

Why it matters

• In order for cryptonetworks to disrupt traditional financial networks, they will need to find a way to fit into the existing regulatory frameworks. According to the FCA’s website, their sandbox provides "access to regulatory expertise and a set of tools to facilitate testing. The tools include restricted authorisation, individual guidance, informal steers, waivers and no enforcement action letters.” This type of oversight could prove to be a major step in getting prominent regulators comfortable with this new technology.
• Managing a traditional investment fund is an expensive and cumbersome process in terms of setup, custody, fund administration and other overhead activities. Many of these processes could be automated by moving them on-chain, which could reduce the costs of starting and operating a fund. With these reduced costs, it would then be easier for talented managers who might not have had the resources necessary to showcase their skills.