Bank of England says blockchain roll-out across all markets too challenging
Reuters
Published Sep 28, 2022 09:30
Updated Sep 28, 2022 10:01
By Huw Jones
LONDON (Reuters) -Using blockchain technology which underpins cryptoassets to offer instantaneous trading and settlement across all financial markets is not desirable given the challenges it would pose, Bank of England Deputy Governor Jon Cunliffe said on Wednesday.
Cunliffe said there was a need to ensure that new approaches to trading and settlement deliver the same level of resilience that regulators expect from the existing system.
Instantaneous settlement means that cash and securities must be in place at the time a trade is struck, and it was unclear how blockchain based platforms and existing technology would work with each other, he said.
"There is simply no time to identify or rectify errors before they are actioned. In short we may not want wholly instantaneous trading and settlement in all markets," Cunliffe told a conference held by financial industry body AFME.
Currently, stock and bond trades are settled two business days after the transaction takes place, creating risky exposures and potential for big market moves in the meantime, which banks must cover with cash for margin and capital.
The United States has set a March 2024 deadline for cutting this to one working day, putting pressure on Europe to follow suit.
There are already pilot programmes for using distributed ledger technology or blockchain for instant trading and settlement of trades to cut costs and risks.
Get The App
Written By: Reuters
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.