Blockchain and DLT a slow burn for CSDs
Don’t move too fast if you want your blockchain to last
Blockchain innovation for central securities depositories (CSDs) is a slow burn and one that can divide opinion. During the Innovation in CSD space: What about distributed ledger technology? session yesterday, some panellists argued that the technology would hail the end of CSDs while others said there would be no revolution, just a “natural evolution” of what exists.
“DLT is the Pokémon Go of finserv,” was how the moderator, Virginie O’Shea, research director at Aite Group, put it. The panel may not have agreed, but they did recognise DLT’s use.
For Robert Palatnick, managing director and chief technology architect at the Depository Trust and Clearing Corp, increasing regulation, legacy systems and costs pressures, are drivers for CSDs to at least embrace some aspects of blockchain.
Cliff Richards, general manager, equity post-trade services at the Australian Stock Exchange said “any change has risk but our eyes are wide open”.
As is often the case with blockchain, panel members said there was “uncertainty” over its use, but Angus Scott, head of product strategy and innovation, Euroclear, added that people should try out their ideas or “we’ll be talking about this for the next six years”.
A specific use case was forthcoming as Artem Duvanov, director of innovations at Russia’s National Settlement Depository, said the CSD is using DLT for proxy voting, because it doesn’t need “huge performance”.
In a pragmatic fashion he said if proxy voting goes wrong, the CSD can forget about it and “do it better” on another platform.
The message from the CSDs was that they are open to innovation with blockchain, but will test it out in safe places first. As Scott said: “We are at the very early stage of an evolution.”
A poll of the audience revealed that 34 per cent of delegates thought DLT should always be private in the securities market (rather than public). The audience was also asked whether it was too early for DLT standards to be established, which could negatively affect the development of the technology. The vote was close – 45 per cent said yes, 47 per cent no and 8 per cent didn’t know.
