ASX Ditches Blockchain Plans, Racks Up $170M Pre-Tax Charges

The Australian Securities Exchange (ASX) has canceled plans to roll out a clearing and settlement system using blockchain technology, resulting in pre-tax charges of $164.6 million to $171.3 million.

On November 17th, ASX halted all current activities of its CHESS Replacement Project following an independent review from Accenture Technology Consulting Firm Accenture, which identified major challenges with the solution design and its ability to meet ASX’s requirements, stating:

Current activities on the project have been paused while ASX revisits the solution design.

ASX has been working for the last five years to develop Distributed Ledger Technology (DLT) to replace the old Clearing House Electronic Subregister System (CHESS), which was created twenty-five years ago.

Originally, the system was set to go live in 2020 but has been delayed due to multiple setbacks, including issues with COVID-19 and uncertainty about when it will be ready for release.

Accenture found that business workflows were unsuitable for a distributed environment, the DLT-based system needed to be easier to understand, and the completion timeline was uncertain even though the application software was over 60% completed.

ASX Chairman Damian Roche apologized for the inconvenience and said:

there are significant technology, governance, and delivery challenges that must be addressed.

Helen Lofthouse, ASX Managing Director and CEO remarked,

it’s clear we need to revisit the solution design — we have some work to do before updating and consulting with stakeholders more deeply.

ASIC And RBA Criticism On ASX

The announcement has been met with harsh criticism from the Australian Securities Investment Commission (ASIC) and the Reserve Bank of Australia (RBA), both of which released a joint statement on the matter.

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RBA Governor Philip Lowe remarked upon the announcement with disappointment, while ASIC Chair Joseph Longo stated: 

failed to demonstrate appropriate control of the program to date, and this has undermined legitimate expectations that the ASX can deliver a world-class, contemporary financial market infrastructure.

In order to overcome these deficiencies, ASX needs to improve its capabilities and make a plan for addressing serious deficiencies.

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