On Tuesday, South Korea’s Financial Supervisory Service (FSS) published a study that called for collaboration with regulatory agencies and companies to create a blockchain-based stock trading system.
A practical solution
The study, published on 2 August, is a thorough report on the status of international stock exchange operators and their integration with blockchain technology. Regulators in countries such as the United States, Japan, the United Kingdom and Australia are making efforts to utilize blockchain technology for their own stock exchanges.
The comprehensive report does recognize the early stage of blockchain technology in Korea. However, it doesn’t make speculation on the possibility of the new system, instead, it observes empirical and historical facts to back the new recommendation.
Major projects around the world
One of its strongest points is the use of distributed ledger technology by NASDAQ. In June 2018, the stock market titan had developed a blockchain system for the optimization of securities as collateral in margin calls, which remedied previous insufficiencies with this method.
Furthermore, it takes into account the London Stock Exchange Group’s (LSEG) recent foray into the nascent space; in July it was reported that the UK exchange was tapping HyperLedger Fabric, a blockchain from the Linux Foundation that the LSEG and IBM are members of.
While the Korean FSS study doesn’t mention this, it is also worth noting that the LSEG is taking on a partnership with blockchain projects that have emerged from the UK’s Financial Conduct Authority’s regulatory sandbox project.
One of the earliest and most ambitious projects surprisingly comes from Australia, and it dates back a couple of years. The Australian Securities Exchange (ASX) made an announcement in August 2016 that it had completed the first version of a project to completely replace CHESS, its existing clearing and settlement system, with blockchain technology. The ASX intends to have the new system rolled out by 2020.
The Korean FSS report concluded that blockchain technology in these use cases is proving to be extraordinarily reliable and efficient, especially with regards to storing and transmitting public transaction information.
The FSS said, “There should be no barrier between public institutions and private companies in developing a blockchain system”, further pledging to “establish long-term planning and continue to promote proofs-of-concept and pilot projects on a project-by-project basis, [as well as to] continue to study the [application of] blockchain… in capital market[s]”.
While South Korea is going strength to strength in its bid to adopt blockchain at an industrial and governmental level, it is utilizing blockchain on the Korea Exchange’s KRX Startup Market in a similar fashion to the countries noted in the study, allowing for the settlement of transactions from unlisted companies.
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