2016年-SWIFT环球同业银行金融电讯_The_impact_of_DLT_on_financial_market_infrastructures_3页_99kb

Summary of "The Impact of DLT on Financial Market Infrastructures"

Core Content

Distributed Ledger Technology (DLT) is being explored by financial market infrastructures (CMIs) such as central securities depositories (CSDs), central counterparty clearing houses (CCPs), and custodian banks. The technology is viewed as a potential tool to reduce costs, manage risks, and increase efficiency in the post-trade process, though opinions vary on whether it represents an opportunity or a threat.

Main Views

Enthusiasts: DLT as an Opportunity

• DLT is seen as a natural evolution for financial institutions, especially in the context of rising costs and regulatory pressures.
• It can streamline internal processes and address specific operational challenges, such as corporate actions processing and proxy voting.
• Some institutions, like ASX and DTCC, are actively testing DLT solutions in non-core areas, with plans to expand their use over time.

Sceptics: DLT as a Limited Impact

• Some argue that DLT is unlikely to disintermediate existing market infrastructures due to the complexity and risk involved in implementing such a radical change.
• They emphasize that widespread adoption, particularly through public DLT networks, is not expected in the near future.
• Concerns about cybersecurity and the lack of standardized practices further dampen enthusiasm for rapid deployment.

Consensus: A Middle Ground

• The industry is cautiously adopting DLT, focusing on non-core services first.
• There is a general agreement that DLT has potential but needs to be tested and integrated carefully.
• The panel at Sibos Geneva 2016 emphasized the need for collaboration, standardization, and inter-operability to ensure the technology’s long-term viability.

Key Information

• DLT Trials: CSDs and other CMIs are testing DLT in areas like post-trade processing, corporate actions, and proxy voting, but not in core services.
• Inter-operability: A major challenge is ensuring that DLT can integrate with legacy systems and other market infrastructures without creating new inefficiencies.
• Public vs. Private Networks: Debate continues on whether public or private DLT networks are more suitable for financial institutions, with public networks requiring regulatory oversight.
• Cyber-Security Concerns: High-profile breaches, such as the Ethereum smart contract hack, have raised questions about the security of DLT systems.
• Need for Standards: There is a strong call for developing best practices and communication standards to support the adoption of DLT and reduce operational risk.
• Regulatory Uncertainty: While regulators are engaged with DLT, there is no consensus yet on how to govern it effectively.

Challenges and Considerations

• Risk Management: Implementing DLT involves significant risk, and institutions are cautious about moving too quickly.
• Cost-Benefit Analysis: While DLT could lead to long-term cost savings, the initial investment and operational adjustments may be costly.
• Collaboration and Coordination: Industry groups like R3 and Hyperledger Project are working on collaborative efforts to develop DLT standards and frameworks.
• Technological Evolution: The uncertainty around DLT's future development and use cases makes it difficult to predict its impact on the financial sector.

Conclusion

The financial market infrastructure sector is in a phase of cautious experimentation with DLT. While there is optimism about its potential to improve efficiency and reduce costs, the lack of standardized practices, inter-operability challenges, and cybersecurity concerns have led to a measured approach. The industry is likely to continue exploring DLT in non-core areas, with a focus on collaboration and gradual integration rather than rapid adoption.