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

<div id="highlights-block_6209e45d94fb3" class="highlights">
 <ul>
 <li>The ASX boss said more crypto businesses could be listed on the exchange in the future</li>
 <li>The move is a significant pivot for the executive who previously said crypto lacked proper custody options and were risky</li>
 </ul>
 
</div>



Australian Securities Exchange (ASX) CEO Dominic Stevens said Sunday his company would likely list more crypto businesses in the future as the industry continues to develop, the Sydney Morning Herald <a href="https://www.smh.com.au/business/banking-and-finance/more-companies-with-crypto-ties-could-list-on-asx-dominic-stevens-20220213-p59w0i.html" target="_blank" rel="noreferrer noopener">reported</a>.



The move is a significant pivot from ASX&#8217;s warning to domestic investors last year when it <a href="https://www.zdnet.com/article/asx-issues-caution-for-aussies-investing-in-crypto-and-contemplates-exchange-regulation/" target="_blank" rel="noreferrer noopener">submitted</a> findings, relating to custody and private keys, to a senate committee in July.



Steven also said, in June, the distributed ledger technology-based (DLT) settlement system being developed to replace the exchange&#8217;s aging CHESS system sometime in the next couple of years, was set to handle more value than all public blockchains containing crypto assets.



Now the executive appears to be warming to the idea of more crypto-related businesses joining the exchange&#8217;s list, currently dominated by the country&#8217;s largest traditional mining firms and banks.



&#8220;I think as the industry matures, you may see Square-like companies listing into the future,&#8221; said Stevens in the report, referencing a <a href="https://cms.blockworks.co/jack-dorseys-block-to-list-on-australias-asx-in-first-major-crypto-listing-in-exchanges-history/" target="_blank" rel="noreferrer noopener">historic listing</a> that followed Jack Dorsey&#8217;s Block-AfterPay merger last month.



<meta charset="utf-8">Stevens also said the exchange was working toward permitting &#8220;pure&#8221; exchange-traded funds based around ether and bitcoin although, he conceded last week, the exchange is &#8220;protective&#8221; of the quality of companies and labeled the crypto industry as a &#8220;very fast-moving space.&#8221;



Stevens also announced last week he would be <a href="https://www.afr.com/companies/financial-services/asx-ceo-tells-bitcoin-my-blockchain-is-bigger-than-yours-20210624-p583uj" target="_blank" rel="noreferrer noopener">stepping down</a> later in the year and that he was unable to commit to specifics on the years ahead as ASX transitions to DLT technology. The DLT system will be permissioned and private, as opposed to the public networks that underpin the crypto industry&#8217;s decentralized exchanges.



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ASX Chief: More Crypto Businesses Could List on Exchange in Future

<div id="highlights-block_61e0c9487d746" class="highlights">
 <ul>
 <li>Following its merger with buy now pay later firm Afterpay, Jack Dorsey&#8217;s Block will list on the Australian Securities Exchange on January 20</li>
 <li>The move marks a significant first for a crypto-related company to be listed in the country and paves the way for similar companies to feature on the ASX, according to the exchange&#8217;s Group Executive of Listings </li>
 </ul>
 
</div>



The newly merged Block, formerly Jack Dorsey&#8217;s Square (SQ), and buy now pay later firm Afterpay is expected to begin trading on the Australian Securities Exchange (ASX) later this month, marking a major first in the bourse&#8217;s history to list a cryptocurrency-related company.



Following <a href="https://cms.blockworks.co/jack-dorseys-square-to-change-its-name-to-block/" target="_blank" rel="noreferrer noopener">Square&#8217;s rebranding</a> to Block Inc in December, the financial-services company <a href="https://www.afr.com/markets/equity-markets/asx-prepares-for-most-important-listing-in-200-years-20211231-p59l2t" target="_blank" rel="noreferrer noopener">announced</a> last Friday it had bought Australia&#8217;s Afterpay and had concluded a month-long delay for approval by the Bank of Spain on Wednesday.



The merged company is expected to trade via the ASX on January 20 under the ticker (SQ) while Afterpay (APT) shares will be suspended from trading the day before. The move marks a significant first for a crypto-related company to be listed in the country, which was made possible through its purchase of the buy now pay later firm.



Square, which owns the crypto peer-to-peer&nbsp;payment service CashApp, posted earnings exceeding $1.1 billion in gross profits for Q3, 2021, according to a recent <a href="https://s29.q4cdn.com/628966176/files/doc_financials/2021/q3/SQ-3Q-2021-Shareholder-Letter.pdf" target="_blank" rel="noreferrer noopener">shareholder letter</a>. Buy now pay later firms have risen to prominence within Australia in recent years and offer customers the ability to pay for goods and services in installments instead of incurring the full cost upfront.



Caroline Bowler, CEO of Australian crypto exchange BTC Markets, told Blockworks the move was welcome news for the ASX and the Australian blockchain community.



&#8220;The industry here has irreversibly moved forward,&#8221; said Bowler. &#8220;Happily for the ASX, there are a significant number of quality Australian companies in this space. This is an opportunity for the exchange to become a real powerhouse in the sector.&#8221;



Max Cunningham, Group Executive of Listings at the ASX told the <a href="https://www.smh.com.au/business/companies/block-debut-opens-the-asx-gates-for-other-crypto-listings-20220112-p59nmq.html" target="_blank" rel="noreferrer noopener">Sydney Morning Herald</a> on Wednesday, the exchange was establishing a framework for other companies backed by blockchain to debut by the middle of this year.



<blockquote class="wp-block-quote is-layout-flow wp-block-quote-is-layout-flow">“We are moving on it and our goal is to bring investment-grade opportunities in various crypto asset classes to the ASX in the coming months and years,” said Cunningham.</blockquote>



Cunningham also said his exchange wanted to ensure cryptos had an &#8220;appropriate level of maturity and security&#8221; when they hit the traditional market, according to the report.



The ASX has also been seeking to replace its outdated Clearing House Electronic Subregister System with a blockchain-based one, currently in its testing phase, and is expected sometime in the next two years.



Square&#8217;s shares were down 5.86% by the end of the daily closing bell in the US while Afterpay&#8217;s share price was also down by 7.74% by press time.



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