ECB and BoJ Release Report on Distributed Ledger Technology
ECB and Bank of Japan (BoJ) released the outcome of their joint research on distributed ledger technology (DLT) in a report titled, "Payment systems: liquidity saving mechanisms in a distributed ledger environment." This joint research project called “Stella” was launched in December 2016 and it studies the possible use of DLT for financial market infrastructures.
Both BoJ and ECB, in their capacity as providers of market infrastructure services, are exploring DLTs. Their joint research is based on experimental work with the technology and contributes to the ongoing broader debate concerning the usability of DLTs for financial market infrastructures. Depending on technological developments and implementation models, this technology could increase efficiency, for example, by facilitating the automation of recordkeeping and streamlining complex processes. The technology could also lead to improvements in safety and resilience to a range of non-financial risks. The key findings of the joint analysis are as follows:
DLT-based solutions could meet the performance needs of a Real-Time Gross Settlement (RTGS) system. Within the restricted test environment, both average and peak payment traffic consistent with that of BOJ-NET and TARGET2 (the RTGS systems of the two central banks) was processed without difficulty.
DLT performance is affected by network size and distance between nodes.
DLT solutions have the potential to strengthen resilience and reliability.
While the test series produced promising results, it should be taken into account that no direct conclusions can be drawn from the test setup with respect to a potential usage in production. Given the relative immaturity of the technology, DLT is not a solution for large-scale applications like BOJ-NET and TARGET2 at this stage of development. A DLT is a set of tools for recording data, such as asset holdings or financial transactions; it allows a network of computers to verify and store updates without a single central management system.
Related Link: Joint Report (PDF)
Keywords: Europe, Asia Pacific, Japan, PMI, DLT, BOJ-NET, Target2, ECB, BoJ
Previous Article
EC Standards on Disclosure of Encumbered and Unencumbered AssetsRelated 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