- Australian Cryptocurrency Exchange Cancels Blockchain Plans
- Significant Challenges and Detailed Identified in the Blockchain Upgrade
- ASX has Indicated that it Will Explore Options for Another Attempt at Rebuilding its Software Platform
In a Nov. 17 statement, The Australian Securities Exchange (ASX) announced that it had decided to cancel its long-anticipated plans to use blockchain technology for its clearing and settlements system upgrade. The project, known as the CHESS replacement project, had been in the works for nearly five years but faced significant challenges and delays. The project’s cancellation has potentially cost ASX over $170 million.
The ASX had been working on a distributed ledger technology (DLT) solution to replace its outdated Clearing House Electronic Subregister System (CHESS), which is used for recording shareholdings and managing transaction settlements. Initially scheduled for a 2020 launch, the project faced numerous delays due to testing requirements, uncertainty around COVID-19, development needs, capacity overhauls, and additional testing.
Referring to an independent review conducted by Accenture, and its internal assessment, ASX said:
“An independent review conducted by technology consulting firm Accenture revealed significant challenges with the solution design and its ability to meet ASX’s requirements.”
Accenture’s report highlighted that the business workflows were not tailored for a distributed environment, the DLT-based system needed to be more complex, and the completion timeline was uncertain despite the application software being over 60% complete.
Reevaluation and Criticism
ASX Chairman Damian Roche acknowledged the disruption caused by the project’s cancellation and recognized the need to address technology, governance, and delivery challenges. ASX Managing Director and CEO Helen Lofthouse stated that a reevaluation of the solution design was necessary, and further consultation with stakeholders would be conducted.
The Australian Securities Investment Commission (ASIC) and the Reserve Bank of Australia (RBA), the country’s financial market regulator and central bank, respectively, expressed their disappointment and concerns in a joint statement. RBA Governor Philip Lowe called the ASX announcement “very disappointing” and said:
‘The announcement by ASX after many years of investment by both ASX and industry is very disappointing. ASX must prioritize developing a new plan to deliver safe and reliable clearing and settlement infrastructure. The Reserve Bank of Australia also expects ASX to maintain the current CHESS so that it continues to operate reliably and support confidence in Australia’s cash equity markets.’
ASIC Chair Joe Longo stated that the ASX needed to demonstrate appropriate control of the program and deliver a modern financial market infrastructure.
Future Plans and Financial Implications
ASX has stated that it will consider options for another attempt at rebuilding its software platform but clarified that it would not involve blockchain or distributed ledger technology (DLT). The company’s project director, Tim Whiteley, mentioned the need to explore more conventional technology to achieve the desired business outcomes. ASX has recorded a pre-tax charge of approximately AUD 250 million ($168 million) for the project.
ASX’s decision to abandon the blockchain-based upgrade represents one of the highest-profile repudiations of the technology that was initially celebrated for its ability to power cryptocurrencies and revolutionize online transactions. The ASX project was seen as a prominent use case for blockchain technology, but its cancellation marks a setback for the concept.
