Distributed ledger technology is not mature enough for large-scale applications like real-time gross settlement (RTGS) systems, the Bank of Japan and European Central Bank have concluded.
The BoJ and ECB teamed up late last year on 'Project Stella', investigating the use of DLT for financial market infrastructures. The pair began with their RTGS systems, spending several months replicating the liquidity saving mechanisms of BOJ-NET ad Target2 in Hyperledger Fabric.
Reporting back, the central banks say that the results "provide reasons to be optimistic with respect to the capabilities of DLT within payment systems". Within the test environment, both average and peak payment traffic consistent with BOJ-NET and Target2 was "processed without difficulty".
However, the report notes that the higher the number of nodes and the longer the distance between network nodes, the longer it takes for a payment to be processed. Another issue is that the the platform used in the tests includes a certificate of authority, which could become a single point of failure.
Ultimately, the banks concludes: "Given the relative immaturity of the technology, DLT is not a solution for large-scale applications like BOJ-NET and Target2 at this stage of development."
The caution is hardly a surprise; announcing Project Stella, ECB executive board member Yves Mersch stressed that the bank cannot "at this stage" consider basing its market infrastructure on DLT because the technology is simply not yet mature enough.
The Bank of England, which has carried out its own pilot with Ripple, had come to the same conclusion, although it has vowed to make a new RTGS platform compatible with DLT usage in the private sector.
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