Japan Exchange Group is talking up the transformational potential of the use of distributed ledgers in capital markets after analysing the results of proof of concept trials with member firms over the course of the past year.
JPX has conducted two separate trial runs of distributed ledger technology with Nomura Research Institute and IBM this year.
With NRI, the exchange worked with Nomura, SBI Securities and Mitsubishi UFJ Financial Group and blockchain specialist Currency Port to investigate the use of Ethereum to decentralise information and resist data tampering when managing stockholders’ accounts. Earlier in the year, it ran tests of the technology in low volume markets in conjunction with IBM, using the framework provided by the Hyperledger Project.
In a report on the outcomes, JPX says: "We have tested whether a streamlined process on securities market, security issuance, trading, settlement, clearing, and ownership registry, could be realised in a DLT environment. Through our research and PoCs, we have concluded that DLT has the potential to transform capital market structure by encouraging new business development, improving operation efficiency, and contributing to cost reduction."
While JPX is confident that DLTs have the potential to "rebuild the financial business models that exist today", it points to a number of short and long-term technical issues that need to be resolved, including non-determinism in executing smart contracts, data privacy control, and throughput capacity in high volume markets.
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