Australian Securities Exchange scraps blockchain settlement due to excessive complexity, loses $168 million
The Australian Securities Exchange (ASX) has scrapped a blockchain settlement system it has been working on for years. The move follows a scathing report from Accenture, which identified several challenges with the system and will cost the exchange over 160 million dollars.
ASX has been working on migrating its workflow and settlement to a distributed ledger technology (DLT) based system for over six years now. It partnered with Digital Asset Holdings on the initiative, which aimed to replace the aging Clearing House Electronic Subregister System (CHESS).
However, six years and hundreds of millions of dollars later, the exchange, the largest in Australia, has scrapped the project.
“We embarked on this project with the latest information available at the time, determined to deliver to the Australian market a post-trade solution that balanced innovation and state-of-the-art technology with security and reliability,” ASX chairman Damian Roche said in a statement.
“However, after further review, including consideration of the findings of the independent report, we have concluded that the path we were on will not meet the ASX’s and the market’s high standards,” he revealed.
The ASX leader further apologized for “the disruption experienced in relation to the CHESS replacement project over several years.”
CHESS is the system that the ASX currently uses to manage the settlement of share transactions. The exchange has been under pressure to upgrade the system for some time now as securities trading continues to evolve globally.
In 2016, it announced that it had partnered with Digital Asset Holdings, a New York-based blockchain technology firm, to upgrade CHESS to a DLT-based system. The partnership thrust the tech firm into the global spotlight and helped it raise hundreds of millions of dollars under its then CEO, Blythe Masters.
The project has faced several obstacles since then. It started with some of the companies in Australia opposing a shared ledger, and in the years that followed, relations between the ASX and Digital Asset Holdings began to deteriorate. Masters ended up stepping down from her top role, and it’s been downhill ever since.
For the ASX, an independent report from Accenture was the final straw. The report found that uncertain timelines, excessive complexity and unclear communication with Digital Asset Holdings had doomed the project to catastrophic failure.
“The current CHESS remains secure and stable, and performs well. The ASX will continue to invest in its capacity and resilience,” the exchange stated in an attempt to save face.
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