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ASX Ends Blockchain Initiative: Australian Stock Exchange Shifts Away from DLT

The Australian Securities Exchange (ASX) discontinues its seven-year blockchain venture aimed at upgrading the CHESS system, opting for more traditional methods to meet business goals. This strategic shift poses questions on the role of blockchain in the financial sector.

In a significant development for the blockchain and distributed ledger technology (DLT) landscape, the Australian Securities Exchange (ASX) has decided to abandon its ambitious blockchain initiative after seven years of development. The ASX, Australia's largest stock exchange with a market capitalization exceeding $2.5 trillion and over 2,200 listed firms, had initially planned to leverage blockchain technology to revamp its existing Clearing House Electronic Subregister System (CHESS).

During a meeting on May 17, ASX exchange project director Tim Whiteley revealed that the exchange would need to explore more conventional technology options to achieve its desired business outcomes. The decision to shift away from blockchain technology comes after careful consideration of the project's progress and the challenges faced along the way. The exchange expects to adopt a new strategy by the end of the year, which involves seeking proposals and feedback from potential software vendors.

ASX's blockchain initiative, first announced in 2016, aimed to leverage the potential benefits of blockchain technology, including increased efficiency, reduced costs, improved security, and enhanced transparency. The exchange had partnered with Digital Asset Holdings, a New York-based blockchain company, to develop a permissioned enterprise blockchain accessible only to approved participants.

Despite extensive testing, development phases, and successful prototypes, the blockchain initiative encountered delays and challenges. In November of last year, ASX paused the overhaul of the CHESS system following an independent report by Accenture, which highlighted significant design challenges and their inability to meet ASX's requirements. As a result, ASX wrote off approximately $170 million (equivalent to approximately $255 million AUD) in pre-tax losses associated with the abandoned blockchain initiative.

The ASX's decision to move away from blockchain technology for CHESS reflects the need for a more practical approach to achieve their business objectives. While this marks a setback for blockchain adoption in the financial industry, it highlights the importance of thorough assessment and adaptability when implementing transformative technologies. As the ASX explores alternative solutions, the future of blockchain in the Australian financial landscape remains a subject of ongoing discussion and observation.