Australia’s Stock Exchange (ASX) revealed a decision to terminate the pursuit of the blockchain initiative. Despite spending seven years developing blockchain technology, ASX resolved this in a May 17 meeting.
The deliberations that dominated the meeting on the viability of blockchain technology saw ASX drop the project to use distributed ledger technology (DLT). The project sought to revamp the Clearing House Electronic Subregister System (CHESS).
ASX Bid to Rebuild CHESS Initiative Becomes Challenging
Reuters captured snippets of meeting recordings in a Friday publication. It quoted the ASX project head Tim Whiteley who clarified that while the team is exploring other viable options, he ruled out returning to the initial solution. Instead, ASX will pursue more conventional technology.
The move by ASX to consider beyond blockchain technology echoes the stance adopted by the Downunder stock exchange. Downunder ruled out pursuing blockchain technology in its upcoming upgrade for the trading software.
ASX is the leading stock exchange in the country, with a market capitalization estimated to exceed $2.5 trillion. The exchange has over 2200 firms listing majorly drawn from Australia.
The Reuters publication indicated that ASX anticipates integrating the new strategy before the onset of 2024. In particular, Whiteley informed the meeting participants that ASX had already submitted a request for detailed information to parties of potential software.
The project director requested that the vendors provide detailed feedback in their proposals.
ASX Journey with Blockchain-based Technology
Integrating blockchain-based systems has been an ongoing objective of the ASX. The initiative traces to 2016 in a resolution that it should replace the CHESS system. The ASX would hold a series of meetings to explore the benefits attributed to blockchain-based systems.
The items dominating the agenda are benefits offered by blockchain. In particular, the participants have weighed on efficiency, cost reduction, and improved security. Also, the meeting participants explored whether the blockchain initiative would enhance transparency in ASX operations.
Whiteley informed the participants that ASX partnered with Digital Asset Holdings. The New York-based firm would lead the development of the new system. The project director indicated that the project aimed to leverage the permissioned enterprise solution restricted to the approved participants.
Several Postponements of Blockchain-based System Launch Date Ends in Abandonment
Whiteley revealed that ASX committed resources and time to the blockchain initiative. He revealed that the team completed several successful tests in the development cycle. Such involved conducting industry-wide consultations and prototype rollout.
The project director admitted that the blockchain initiative suffered several delays, forcing the launch date to postpone. After several changes to the launch date, ASX decided to pause the process to overhaul the CHESS system in November 2022.
Whiteley revealed that the team tasked with rebuilding the 30-year-old CHESS conducted industry-wide consultations. The final phase featured the involvement of software vendors and interested parties in offering comprehensive feedback.
Blockchain Initiative Suspended Following Flawed Design
The ASX project executive confirmed receipt of feedback conveyed by several market participants. A dominant finding was that ASX preferred to utilize a less risky approach. Also, the participants directed the ASX to avoid imposing a sudden transition to blockchain-based software on one date.
Whiteley admitted the inclusion of the consultation findings during the implementation planning process. An independent survey by Accenture would reveal inherent weaknesses in the solution designs that would ultimately hinder the capability to satisfy ASX’s requirements.
The discovery of flawed design led ASX to pause the blockchain initiative in November 2022. ASX revealed in the May 17 meeting that the abandoned blockchain project brought a $170 million pre-tax loss that it wrote off.
Editorial credit: Primakov / Shutterstock.com
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