26 September 2017
Find out more

Regulatory and technology challenges impede the rapid roll out of DLT says DB exec

11 September 2017  |  7642 views  |  0 deutsche borse

Regulatory impediments and the current fragmentation of protocols from a multiplicty of providers of distributed ledger technology will prove to be a major challenge for banks to overcome before the technology can go mainstream in financial markets, says a senior Deutsche Börse executive.

Writing in a report for the World Federation of Exchanges, Deutsche Börse’s Stefan Teis, SVP, business & product development says real-life applications of DLT in the financial sector will not become more widespread until regulators are convinced that the technology can be made compliant with the existing regulatory framework.

"Many blockchain features are at odds with existing regulation," he points out. "A simple example is client anonymity which is diametrically opposed to the tightened transparency requirements demanded by regulators in recent years (e.g. in the area of taxation, Know Your Customer, compliance, etc.). This essentially eliminates the use of a public distributed ledger construct for the financial industry."

Deutsche Börse, like many other market infrastructure providers, has had a dedicated team exploring potential applications of blockchain-based services for the past two years. The exchange operator is currently running three separate tests of the technology both internally and collaboratively with third party partners.

These include a partnership with Deutsche Bundesbank to test the settlement of securities in delivery-versus-payment mode for centrally-issued digital coins, as well as the pure transfer of either digital coins or digital securities alone; CollCo, which investigates the P2P transfer of commercial bank money using a virtual currency, and; a global initiative in collaboration with central securities depositories in Canada, Norway and South Africa, to facilitate cross-border movement and provision of securities collateral.

"Fundamentally we believe that in order for the technology to have widespread adoption we need three foundational pillars," says Teis. "One is the ability to access central bank liquidity on DLT; two is to access commercial bank liquidity on DLT; and three is to be able to conduct multijurisdictional transfer of securities on a single DLT platform."

Teis accepts that DLT is here to stay for the long-term due to its "indisputable benefits".

But there is a long road to travel: "Prior to widespread application in the financial sector, the technology has to advance and a greater level of technological standardisation has to be achieved. There current fragmentation of protocols and providers will prove to be a challenge. Implementation also needs understanding, recognition, and approval by regulators which will evolve over time."
KeywordsDEPOSITORIES

Comments: (0)

Comment on this story (membership required)

Finextra news in your inbox

For Finextra's free daily newsletter, breaking news flashes and weekly jobs board: sign up now

Related stories

Former Deutsche COO takes stake in DLT venture Cobalt

Former Deutsche COO takes stake in DLT venture Cobalt

03 August 2017  |  12436 views  |  0 comments | 4 tweets | 5 linkedin
Deutsche Bourse fintech venture fund targets blockchain and AI

Deutsche Bourse fintech venture fund targets blockchain and AI

03 March 2017  |  46436 views  |  0 comments | 20 tweets | 11 linkedin
Deutsche Börse looks for collateral shift with 'CollCo' digital coins

Deutsche Börse looks for collateral shift with 'CollCo' digital coins

23 January 2017  |  11158 views  |  0 comments | 19 tweets | 24 linkedin
Deutsche Bourse turns to fintech partners to build 'Exchange 4.0'

Deutsche Bourse turns to fintech partners to build 'Exchange 4.0'

18 January 2017  |  9765 views  |  1 comments | 25 tweets | 19 linkedin
CSDs aim to build distributed ledger for mobilising scarce collateral

CSDs aim to build distributed ledger for mobilising scarce collateral

18 January 2017  |  5633 views  |  0 comments | 7 tweets | 6 linkedin
Deutsche Bundesbank and Deutsche Börse test blockchain tech for securities settlement

Deutsche Bundesbank and Deutsche Börse test blockchain tech for securities settlement

28 November 2016  |  8760 views  |  0 comments | 15 tweets | 23 linkedin
Capital markets expect blockchain to go mainstream within six years

Capital markets expect blockchain to go mainstream within six years

14 November 2016  |  15548 views  |  0 comments | 36 tweets | 43 linkedin
Deutsche Bourse sets up fintech venture fund

Deutsche Bourse sets up fintech venture fund

21 June 2016  |  7284 views  |  0 comments | 16 tweets | 6 linkedin
Deutsche Bourse opens up to fintech startups

Deutsche Bourse opens up to fintech startups

24 February 2016  |  7916 views  |  2 comments | 16 tweets | 11 linkedin
Deutsche Bourse and Markit lend backing to capital markets fintech fund Illuminate

Deutsche Bourse and Markit lend backing to capital markets fintech fund Illuminate

09 November 2015  |  7857 views  |  0 comments | 11 tweets | 8 linkedin

Related company news

 

Related blogs

Create a blog about this story (membership required)
visit www.temenos.comvisit www.capgemini.comdownload the paper now

Top topics

Most viewed Most shared
AXA launches blockchain to cover late flight compensationAXA launches blockchain to cover late flig...
12251 views comments | 16 tweets | 30 linkedin
European Commission makes fintech a priority in supervisory shakeupEuropean Commission makes fintech a priori...
8853 views comments | 34 tweets | 46 linkedin
hands typing furiouslyBlockchain is a new way of thinking?
7566 views 2 | 10 tweets | 1 linkedin
German central bank flags DLT weaknessesGerman central bank flags DLT weaknesses
7303 views comments | 17 tweets | 19 linkedin

Featured job

Competitive base, double ote, benefits
London, UK

Find your next job