ECB Publishes Results of Study on Use of DLT in Securities Settlement
ECB published a report on the second phase of Project Stella, which is a joint research project of ECB and BOJ. The report describes the key findings of the joint study (of ECB and BOJ) on the application of distributed ledger technology (DLT) in securities settlement systems. The objective of Stella phase 2 is to explore how the settlement of two linked obligations, such as the delivery of securities against the payment of cash, could be conceptually designed and operated in an environment based on DLT. Legal aspects have not been the object of the study.
The report examines the ways in which delivery versus payment (DvP) can be conceptually designed and technically achieved in a DLT environment. The report draws on the existing DvP models and innovative solutions that are being discussed for distributed ledgers. The analysis is based on a basic, stylized scenario of two counterparties exchanging securities against cash. As was the case in Stella phase 1, this work does not attempt to replicate the existing payment and securities settlement systems and is not geared toward replacing the existing central bank services with DLT-based solutions.
The report presents key results of the second phase of the project and outlines the categorization of DvP solutions in a DLT environment, based on whether assets are on the same or separate ledger. It then describes generic process flows for each DvP approach and assesses their main characteristics from a range of perspectives. The key findings of the analysis are as follows:
- DvP can run in a DLT environment subject to the specificities of different DLT platforms
- DLT offers a new approach for achieving DvP between ledgers, which does not require any connection between ledgers
- Depending on their concrete design, cross-ledger DvP arrangements on DLT may entail complexity and could give rise to additional challenges, which would need to be addressed
Related Links
Keywords: Asia Pacific, Europe, Japan, PMI, DLT, Delivery versus Payment, Fintech, BOJ, ECB
Previous Article
EBA Single Rulebook Q&A: Fourth Update for March 2019Next Article
BCBS Updates Basel III Monitoring FAQ in May 2018Related Articles
SEC Finalizes Climate-Related Disclosures Rule
The U.S. Securities and Exchange Commission (SEC) has finalized the long-awaited rule that mandates climate-related disclosures for domestic and foreign publicly listed companies in the U.S.
US Regulators Release Stress Test Scenarios for Banks
The U.S. regulators recently released baseline and severely adverse scenarios, along with other details, for stress testing the banks in 2024. The relevant U.S. banking regulators are the Federal Reserve Bank (FED), the Federal Deposit Insurance Corporation (FDIC), and the Office of the Comptroller of the Currency (OCC).
Asian Governments Aim for Interoperability in AI Governance Frameworks
The regulatory landscape for artificial intelligence (AI), including the generative kind, is evolving rapidly, with governments and regulators aiming to address the challenges and opportunities presented by this transformative technology.
EBA Proposes Operational Risk Standards Under Final Basel III Package
The European Union (EU) has been working on the final elements of Basel III standards, with endorsement of the Banking Package and the publication of the European Banking Authority (EBA) roadmap on Basel III implementation in December 2023.
EFRAG Proposes XBRL Taxonomy and Standard for Listed SMEs Under ESRS
The European Financial Reporting Advisory Group (EFRAG), which plays a crucial role in shaping corporate reporting standards in European Union (EU), is seeking comments, until May 21, 2024, on the Exposure Draft ESRS for listed SMEs.
ECB to Expand Climate Change Work in 2024-2025
Banking regulators worldwide are increasingly focusing on addressing, monitoring, and supervising the institutions' exposure to climate and environmental risks.
BIS Bulletin Examines Cognitive Limits of Large Language Models
The use cases of generative AI in the banking sector are evolving fast, with many institutions adopting the technology to enhance customer service and operational efficiency.
ECB is Conducting First Cyber Risk Stress Test for Banks
As part of the increasing regulatory focus on operational resilience, cyber risk stress testing is also becoming a crucial aspect of ensuring bank resilience in the face of cyber threats.
EBA Continues Momentum Toward Strengthening Prudential Rules for Banks
A few years down the road from the last global financial crisis, regulators are still issuing rules and monitoring banks to ensure that they comply with the regulations.
EU and UK Agencies Issue Updates on Final Basel III Rules
The European Commission (EC) recently issued an update informing that the European Council and the Parliament have endorsed the Banking Package implementing the final elements of Basel III standards