According to the Bank of England, using blockchain technology in every market is too complicated
The Deputy Governor of the Bank of England, Jon Cunliffe, said on September 28 that the use of blockchain technology, the basis of crypto assets, to allow speedy trading and settlement across all financial markets is undesirable due to the problems it would involve.
According to Cunliffe, it is crucial to ensure that trading and settlement innovations are as solid in the eyes of regulators as the present system, as reported by Reuters on September 28.
Cash and securities on hand at the time of a trade’s execution are required for rapid settlement, he noted. Uncertainty surrounded the compatibility of blockchain-based systems with existing technologies.
Currently, settlement for stock and bond transactions occurs two business days following the transaction. This leads to riskier exposures and the prospect of big market changes, which banks must cover with funds for margin and capital.
Therefore, the United States has set March 2024 as the goal date for lowering this to one working day, and they are pressuring Europe to do the same.
In the meanwhile, pilot programs are in place to explore the use of distributed ledger technology or blockchain for speedy trading and settlement of transactions, with the aim of decreasing costs and risks.
Previously, Cunliffe had cautioned that the fast expansion of cryptocurrencies might represent a severe danger to the existing financial system, and in July, the Bank of England rejected the use of the digital pound as payment.