Sebastian Sinclair

The Australian Securities Exchange (ASX) has placed a blockchain system (DLT) intended to upgrade its aging settlement layer on indefinite hold after three years of development.



The move marks the end of what was to be one of the most impactful implementations of distributed ledger technology — business-speak for <a href="https://cms.blockworks.co/news/enterprise-blockchain-provider-targets-wall-street-partners-with-rebrand" target="_blank" rel="noreferrer noopener">enterprise blockchain</a> — to date.



In a <a href="https://www2.asx.com.au/content/dam/asx/about/media-releases/2022/60-17-november-2022-CHESS-Replacement-ASX-reassessing-financial-derecognition_.pdf" target="_blank" rel="noreferrer noopener">statement</a> on Wednesday, ASX said its DLT, once pegged to replace its 25-year-old Clearing House Electronic Subregister System (CHESS), simply didn’t measure up.



ASX inked a <a href="https://www.asx.com.au/documents/about/MediaRelease-ASX-DigitalAsset-and-VMware-join-forces-on-DLT.pdf" target="_blank" rel="noreferrer noopener">three-party memorandum of understanding</a> in 2019 with enterprise blockchain firm Digital Asset and cloud computing giant VMware to build the software.



Between 245 million and 255 million Australian dollars ($165 million to $171 million) spent on developing the DLT will be scrubbed from ASX’s balance sheet starting next year, a spokesperson told Blockworks. 



The funds were previously listed as a financial asset or liability. ASX doesn&#8217;t expect the outcome to impact the company’s dividends.



DLTs are private (permissioned) blockchain-powered networks; databases involving multiple vetted parties across multiple trusted nodes, which process actions within a closed system.&nbsp;



Large companies and other institutions have gravitated towards DLT solutions rather than permissionless blockchains, as they award supreme power and control over the networks they support, with “blockchain, not Bitcoin” the mantra for many over the past five years.



Compare that with public (permissionless) blockchain systems such as Bitcoin and Ethereum. These networks have no central power and allow anyone at all (with the right equipment) to join, validate and otherwise participate in the network.



The ASX spokesperson said that while current activities on the project have been paused, it has not definitively ruled out a DLT implementation in the future.&nbsp;



“As we revisit solution design we will go back with an open mind,” the spokesperson said. “We will evaluate a number of options and we will work with both [Digital Asset] and VMware in those investigations.”&nbsp;



<h3 class="wp-block-heading">ASX repeatedly pushed back its DLT blockchain system</h3>



The Australian bourse, which handles clearing, settlement and registration of securities and equities in the country, first began exploring options to replace CHESS more than seven years ago.&nbsp;



Toward the end of 2018, DLT was tipped as the technology of choice to help modernize its systems, leading to a formal agreement to develop a blockchain-based solution a year later.



Some ASX customers initially balked at the idea, complaining that the blockchain implementation could ultimately fail. The exchange delayed the implementation <a href="https://www.thetradenews.com/asx-confirms-one-year-delay-to-dlt-post-trade-system/" target="_blank" rel="noreferrer noopener">several times</a> due to concerns over exactly how the new system would function.&nbsp;



The transition was initially slated to go live in 2020. Citing significant challenges posed by the design, ASX’s decision to can its DLT stemmed from a <a href="https://www2.asx.com.au/content/dam/asx/markets/clearing-and-settlement-services/asx-chess-replacement-application-delivery-review-2022.pdf" target="_blank" rel="noreferrer noopener">review</a> undertaken by IT consulting giant <a href="https://cms.blockworks.co/news/asx-taps-accenture-to-review-delayed-delivery-of-blockchain-system/" target="_blank" rel="noreferrer noopener">Accenture</a>, which was started in <a href="https://cms.blockworks.co/news/asx-taps-accenture-to-review-delayed-delivery-of-blockchain-system" target="_blank" rel="noreferrer noopener">August this year</a> and issued earlier this month.



Accenture said distributed systems introduce higher latency, exacerbated by multiple layers including client nodes, CHESS’ application and the ledger itself, where transactional data is stored.



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‘Blockchain, not Bitcoin’ is Dead? Australian Bourse Cans DLT Shift

<div id="highlights-block_62e9e78edd821" class="highlights">
 <ul>
 <li>The exchange has faced several delays to its DLT implementation over a number of years</li>
 <li>More development is required in order to meet the ASX&#8217;s &#8220;scalability and resilience requirements,&#8221; it said</li>
 </ul>
 
</div>



The Australian Securities Exchange (ASX) said Tuesday it will again delay the rollout of a blockchain replacement for its aging settlement system by at least two years and has hired IT consulting giant Accenture to review the project&#8217;s status.



ASX&#8217;s CHESS replacement project, designed to supersede its decades-old system for settlements and clearances on its platform, is now expected at least until late 2024, ASX said in a statement.



It&#8217;s yet another setback for the exchange which has faced several delays spanning at least three years over plans to implement a distributed ledger-based replacement. 



The implementation of a blockchain or distributed ledger-based system would mark Australia as one of the first countries in the world to adopt the tech for a traditional exchange.



Major securities exchanges including the Nasdaq, the Japan Exchange Group and the London Stock Exchange are also exploring options to implement blockchain technology for order book settlements and clearances.



Yet the technical implementation and adoption of the tech have proved to be a challenge in Australia. ASX said both itself and application software provider Digital Asset had identified more development being required than previously anticipated in order to meet the exchange&#8217;s &#8220;scalability and resilience requirements.&#8221;



Those requirements have contributed to ongoing delays in the delivery of the final technical components for the replacement, the exchange said.



<h3 class="wp-block-heading">High Hopes for DLT</h3>



Helen Lofthouse, who replaced Dominic Stevens as ASX’s Managing Director and CEO at the beginning of August, has expressed support for the replacement project, prompting an independent review to assess the remaining deliverables, ASX said.



Dublin-based information technology services and consulting firm Accenture is expected to conduct the review of the new CHESS application to identify the system&#8217;s shortcomings. 



&#8220;Several consultancies were assessed,&#8221; a spokesperson for ASX told Blockworks via email. &#8220;Accenture was selected as having the most contemporary and relevant expertise and current skills with Daml and distributed ledger technology (DLT)&#8221;. Daml&nbsp;is a private, scalable smart contract language for DLT, blockchain and databases.



The spokesperson also told Blockworks that ASX has engaged Ernst &amp; Young, another IT consulting firm, to assess the terms of reference for the review to &#8220;ensure appropriate governance arrangements are in place.&#8221;



Accenture&#8217;s review is expected to identify necessary actions for ASX to communicate a revised timetable on when exactly the project will be completed, the exchange said.



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ASX Taps Accenture to Review Delayed Delivery of Blockchain System

Shalini Nagarajan

<div id="highlights-block_629f11fe2f9e6" class="highlights">
 <ul>
 <li>52% of affluent Asians held crypto in Q1 2022, but 67% of wealth managers have no plans to offer related services, an Accenture survey found</li>
 <li>Investors in Indonesia and Thailand had the largest percentage of digital asset allocation compared to peers</li>
 </ul>
 
</div>



As investors grapple with seismic economic shifts such as soaring inflation and rising cost of living, more are turning to investments aiming to insulate their wealth. According to new research <a href="https://newsroom.accenture.com/news/providing-advisory-services-is-increasingly-critical-for-wealth-management-firms-looking-to-seize-growth-opportunities-in-asia-accenture-report-finds.htm" target="_blank" rel="noreferrer noopener">by Accenture</a>, 52% of well-to-do Asian investors held digital assets — including cryptocurrencies, tokenized assets and crypto funds — in the first quarter of 2022.



The study found digital assets make up 7% of these investors’ portfolios, making it the fifth-largest asset class in Asia. That means it receives a greater share of investments than foreign currencies, commodities or collectibles in the region.



Equities, fixed income, cash and real estate have a more hefty weighting compared to digital assets in their portfolios, the <a href="https://www.accenture.com/us-en/insights/capital-markets/wm-future-asia-digital-assets-unclaimed-territory" target="_blank" rel="noreferrer noopener">research</a> showed.



A further 21% are expected to enter the asset class by the end of 2022, suggesting that as much as 73% of affluent Asian investors would hold digital assets by then.&nbsp;


<div class="wp-block-image">
<figure class="aligncenter size-large"><img loading="lazy" decoding="async" width="1024" height="660" src="https://blockworks-co.imgix.net/wp-content/uploads/2022/06/2022-06-07-Accenture-survey-1024x660.png" alt="" class="wp-image-22522" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2022/06/2022-06-07-Accenture-survey-1024x660.png?w=1024 1024w, https://blockworks-co.imgix.net/wp-content/uploads/2022/06/2022-06-07-Accenture-survey-1024x660.png?w=300 300w, https://blockworks-co.imgix.net/wp-content/uploads/2022/06/2022-06-07-Accenture-survey-1024x660.png?w=768 768w, https://blockworks-co.imgix.net/wp-content/uploads/2022/06/2022-06-07-Accenture-survey-1024x660.png?w=399 399w, https://blockworks-co.imgix.net/wp-content/uploads/2022/06/2022-06-07-Accenture-survey-1024x660.png?w=405 405w, https://blockworks-co.imgix.net/wp-content/uploads/2022/06/2022-06-07-Accenture-survey-1024x660.png?w=340 340w, https://blockworks-co.imgix.net/wp-content/uploads/2022/06/2022-06-07-Accenture-survey-1024x660.png?w=80 80w, https://blockworks-co.imgix.net/wp-content/uploads/2022/06/2022-06-07-Accenture-survey-1024x660.png?w=50 50w, https://blockworks-co.imgix.net/wp-content/uploads/2022/06/2022-06-07-Accenture-survey-1024x660.png?w=1305 1305w" sizes="(max-width: 1024px) 100vw, 1024px" /><figcaption>Asia Affluent Investor Survey, Q1 2022; Source: <a href="https://www.accenture.com/_acnmedia/Accenture/Conversion-Assets/Secure/pdf-no-index-6/Accenture-Wealth-Management-Asia-Digital-Assets-Unclaimed-Territory" target="_blank" rel="noreferrer noopener">Accenture</a></figcaption></figure></div>


Accenture said about 3,200 consumers responded to the survey, having investable assets ranging from at least $100,000 to over $5 million. They were from mainland China, Hong Kong, India, Indonesia, Japan, Malaysia, Singapore and Thailand. Investors in Indonesia and Thailand had the largest allocation to digital assets compared to their peers as of the first quarter of 2022.



Although the key statistic suggests a large chunk of Asian investors want services related to digital assets, the study found that 67% of wealth management firms aren’t planning to dive into it just yet.



<h3 class="wp-block-heading">Wealth managers remain cautious</h3>



Hesitancy due to unclear regulation is among the factors holding back wealth managers. They prefer to either maintain a wait-and-see approach, not fully believing in the potential of the asset class, or they anticipate complexities due to varying regulatory and operating models. 



“We would need to be able to provide an informed view on key crypto coins, which requires specialized research capabilities,” said Sacha Walker, head of strategy and business operations for the Asia-Pacific region at Julius Baer. 



<blockquote class="wp-block-quote">“In addition, we are currently exploring a compliant offering for suitable clients. This entails educating and training both relationship managers and clients on the risks, suitability and mechanics of digital assets.”</blockquote>



A downside to wealth management firms not offering digital asset services is it forces clients to seek advisory information online, which could provide far less reliable, according to Accenture.



The firm estimates that digital assets are a $54 billion market opportunity in Asia, of which $40 billion stem from transaction fees. The rest is split between advisory and custody fees.



A similar <a href="https://cms.blockworks.co/gemini-report-crypto-reached-tipping-point-in-2021/" target="_blank" rel="noreferrer noopener">survey</a> conducted by Gemini earlier this year shows about 40% of crypto owners around the world first bought digital assets in 2021. It found crypto ownership was the highest in Brazil and Indonesia.



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