ASX ends its blockchain project and writes off $250 million

ASX ends its blockchain project and writes off $250 million

The ASX’s withdrawal from its plan to build a private blockchain comes after a dreadful few weeks in the broader space after crypto exchange FTX collapsed, sending down the value of a wide range of cryptocurrencies also powered by blockchain technology had drawn.

“Significant Challenges”

Accenture found that the ASX application software developed by Digital Asset, in which ASX has an interest, was only 63 percent complete. The system’s design was found to be overly complex, “including how ASX requests interact with the application and the underlying ledger.”

ASX Chairman Damian Roche said: “The path taken does not live up to the high standards of ASX and the market. There are significant technology, governance and delivery challenges that need to be addressed.

“On behalf of ASX, I apologize for the disruption that has occurred over several years related to the CHESS replacement project.”

ASX said it will set up an industry forum to provide input and receive regular status reports on the project when deciding what to do next.

Clearing and settlement market regulators, the Australian Securities and Investments Commission and the Reserve Bank, said the ASX decision “marks a significant setback for the replacement of critical national infrastructure for Australia’s cash equity markets and now focuses on the longevity of the existing ones CHESS platform”.

ASIC and the RBA have sent a joint letter to ASX outlining expectations for ASX to ensure the current CHESS system is “supported and maintained to ensure its stability, resilience and longevity to continue to serve the market reliably.” can operate”. They have called for ASX to improve its program delivery capabilities and for the CHESS replacement program to be “put back on track after solution design is complete.”

“The announcement of ASX after many years of investment by both ASX and the industry is very disappointing,” said Dr. Lion. “ASX must prioritize the development of a new plan to provide a secure and reliable clearing and settlement infrastructure.”

Back to the drawing board

ASX selected Digital Asset Holdings to build the distributed ledger in late 2017, having begun researching the technology in 2015. Blockchain consideration came amid huge hype surrounding the technology’s potential to bring efficiencies to markets by reducing the role of intermediaries.

It was originally slated to go live in April last year. However, this was postponed several times when it became clear that the system would not meet the demands of the market. This included not having enough throughput to process trades.

The ASX struggled to bring to life its original intent to reduce the cost of operating the market as the proposed technology struggled to interface with disparate systems connected to the settlement and clearing system. The incumbent registration and custodial firms were concerned that the ASX was attempting to use the technology to take over their functions.

The ASX will now return to the drawing board to determine if blockchain can still play a role in settlement and clearing, or if it needs to use some other form of technology. She didn’t develop a “Plan B” parallel to the project.

“I am very disappointed to make this announcement today,” said Helen Lofthouse, CEO of ASX.

“We will come back to this with an open mind. We are striving to find the best solution for the Australian market and will be far reaching and thoughtful in our analysis of options.”

“To be clear, the decommissioning fee reflects the uncertainty of the future value of the current solution design. It doesn’t stop us from using parts of what we’ve already built when we find that we can make adjustments to our current design that allow it to meet the high standards of ASX and the market,” she said.

After being criticized by market participants in recent years for not consulting with its clients extensively, ASIC and the RBA said they expect ASX to actively consult with the industry throughout the new process “to ensure that the market confidence in the chosen implementation option, delivery plan and schedule”.

Regulators said they would work directly with the brokerage industry to ensure their perspectives are properly reflected by ASX.

ASX said Tim Whiteley, a former Westpac executive, has been appointed project lead for the next phase of the CHESS replacement. ASX will continue to invest in the existing CHESS system – but this will ultimately have to be replaced.

Ms. Lofthouse said Digital Asset, which developed the software, and VMWare, which created the distributed ledger, could still play a role in creating a revamped system.

The independent report underscored “the scale and complexity of the CHESS replacement project,” ASX said. It identified “issues with supplier management,” including the way ASX teams and those of Digital Asset “operate and interact, which poses challenges in project delivery.”

It comes after a difficult time for ASX, whose share price has fallen 23 percent this year amid increased regulatory and political scrutiny and new leadership following the departure of former CEO Dominic Stevens and much of his executive team. The ASX board also suffered an initial strike at its annual general meeting in September.

In a separate ASX release on Thursday, ASX announced that 72,283 performance rights had been cancelled. These are understood to have been held by Mr Stevens and former Deputy CEO Peter Hiom, who ran the CHESS replacement project but left in May 2021.

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