The Australian Securities Exchange (ASX) has scrapped a blockchain settlement system that it has worked on for years. The move follows a scathing report by Accenture, which identified several challenges with the system and will cost the exchange over $160 million.
ASX has been working on migrating its workflow and settlement to a distributed ledger technology (DLT)-based system for over six years now. It partnered with Digital Asset Holdings on the initiative, which aimed to replace its aging Clearing House Electronic Subregister System (CHESS).
However, six years and hundreds of millions of dollars later, the exchange, the largest in Australia, has scrapped the project.
“We began this project with the latest information available at that time, determined to deliver the Australian market a post-trade solution that balanced innovation and state-of-the-art technology with safety and reliability,” ASX chair Damian Roche said in a statement.
“However, after further review, including consideration of the findings in the independent report, we have concluded that the path we were on will not meet ASX’s and the market’s high standards,” he revealed.
The ASX chair further apologized for the “disruption experienced in relation to the CHESS replacement project over a number of years.”
CHESS is the system that ASX currently uses to manage the settlement of share transactions. The exchange has been under pressure to upgrade its system for some time now as securities trading continues to evolve globally.
In 2016, it announced that it had partnered with Digital Asset Holdings, a New York-based blockchain tech firm, to upgrade CHESS to a DLT-based system. The partnership put the tech firm in the global spotlight and helped it raise hundreds of millions of dollars under its then-CEO, Blythe Masters.
The project has faced several hurdles since then. It started with some of the companies in Australia resisting a shared ledger, and in the years that followed, the relationship between ASX and Digital Asset Holdings started to deteriorate. It ended up with Masters resigning from her top role, and it’s been downhill ever since.
For ASX, an independent report by Accenture was the last straw. The report found that uncertain timelines, excessive complexity, and unclear communications with Digital Asset Holdings had relegated the project to be a disastrous failure.
“Current CHESS remains secure and stable, and is performing well. ASX will continue to invest in its capacity and resilience,” the exchange stated in an attempt to save face.
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