Studies conducted by the European Central Bank and the Bank of Japan on the feasibility of using distributed ledgers for delivery-versus-payment in securities settlement have concluded that although conceptually possible, further analysis of safety and efficiency issues is warranted.
The joint research project, dubbed 'Stella', has moved onto a second phase looking at securities settlement following an earlier test in the payments arena that determined that the technology lacks maturity for deployment in a large-scale payment environment such as BOJ-NET and Target2.
For the DvP aspect, the two central banks constructed prototypes using three DLT platforms: Corda, Elements and Hyperledger Fabric.
The findings suggest that DvP could be conceptually and technically designed in a DLT environment with cash and securities either on the same ledger (single-ledger DvP) or on separate ones (cross-ledger DvP). Much depends on the interaction with other post-trade infrastructures and the range of information being shared across participants.
Although technically possible, the cross-ledger approach could impact transaction speed and available liquidity and also give rise to risks from gaps in synchronisation, the paper concluded.
"Given that discussions on applying DLT to DvP arrangements are still at an early stage, further analysis on the safety and efficiency of individual approaches is warranted," state the banks. "Also legal aspects, which have not been part of this study, would need to be further explored."
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