In 2017, the ASX (Australian Securities Exchange) announced that it would be implementing blockchain technology as part of its CHESS replacement scheme. The ASX acts as a market operator, clearing house and payment facilitator. The new distributed ledger system will control the clearing, settlement and asset registration for the exchange.

What do we know about the ASX blockchain project?

We don’t know a whole lot about the ASX’s blockchain project. However, we know that it will be a private permissioned system. The ASX emphasises that, “ASX will use a permissioned system where ASX clients – that meet the necessary regulatory requirements – are permissioned to access the network, just as they do today when connecting to CHESS.”

The ASX’s solution is largely founded upon security and transparency. Blockchain provides a single source of truth for the software.

The primary purpose of the software is, it seems, to be ready for the future – and it seems that, in 2017, the ASX made the right choice. Separating its software from cryptocurrency is also potentially a correct choice. The ‘blockchain, not Bitcoin’ argument is definitely becoming more prominent.

How will it change the way we consider finance?

The finance sector is constantly changing, with new ways to pay online and new ways to handle money. The ASX is a major financial body and it will change the way we view finance.

The ASX’s software CHESS is over 25 years old. This is incredibly outdated for a company who are one of the top 10 financial exchanges in Asia, with a total market capitalization of around AUD $2 trillion. While the ASX emphasises that CHESS still works efficiently, they want to set themselves up for the future and, even, the present.

The world and finance is quickly changing. The ASX was the first stock exchange in the world to implement blockchain technology.

The ASX plan has attracted significant criticism. This is because the financial sector has, historically, shied away from largely structural changes. In addition, if there is change, this means that other stock exchanges will need to follow suit. The “technological benefits should easily outweigh the associated costs, which is why blockchain must be accorded greater attention by international and domestic exchanges going forward.”

Implementing blockchain “take[s] future needs into account: blockchain implementation helps the ASX, like with CHESS in its heyday, meet and respond to changing local and global markets, and promote further innovation through [1] new levels of functionality, [2] open standards and [3] flexible technology.”

The ASX blockchain initiative will set the stage for other stock and securities exchanges to move into a future-proof technological model. The finance sector should be leading the way in money, especially if they want to contend with cryptocurrencies.

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