By Oliver Smith on Monday 21 November 2022
One of the earliest large institutional blockchain projects has imploded.
It was heralded as a major milestone for the institutional adoption of blockchain technology. However, after seven years of development, the Australian Securities Exchange (ASX) scrapped its plan to replace its ageing settlement system with a blockchain-powered alternative last week.
AltFi first reported on the project way back in December 2017, and work had started even before that in 2015, when the ASX had turned to Digital Asset Holdings to build a new post-trade settlement system, back when the price of Bitcoin was well below $1,000.
Last week ASX finally confirmed it is pulling the plug on the project, which will result in a charge of between A$245m and A$255m due to the failure.
There is also the loss of an estimated A$150m that banks and financial services firms have spent in Australia in preparing for the blockchain-powered upgrade.
Earlier this year, the ASX drafted Accenture to review the project's status. The final report was ultimately what led ASX to change direction. Accenture’s report contains a laundry list of issues and deemed the continuation of the project to be “high risk with low confidence [of success]”.
Back when it started the project, former CEO Dominic Stevens excitedly explained that: “ASX has been carefully examining distributed ledger technology for almost two and a half years, including the last two years with Digital Asset.”
He said the system would aim to cut the cost of transactions and make them faster and more secure, while putting Australia “at the forefront of innovation in financial markets”.
Sadly, the project has left Australia very much at the rear of innovation in financial markets, with the exchange back to square one regarding upgrading its ageing infrastructure.
The ASX has appointed Tim Whiteley, a former general manager at Westpac, as project director of the CHESS replacement project.
“We began this project with the latest information available at that time, determined to deliver the Australian market a post-trade solution that balanced innovation and state-of-the-art technology with safety and reliability,” wrote the ASX’s chair Damian Roche last week announcing the change in direction.
“However, after further review, including consideration of the findings in the independent report, we have concluded that the path we were on will not meet ASX’s and the market’s high standards. There are significant technology, governance and delivery challenges that must be addressed.”