ASX abandons $170 million blockchain Chess replacement project | australian stock exchange, damian roche, digital asset, shane akeroyd, asx, hkex, clearing house electronic subregister system, chess

After a series of delays, the Australian Stock Exchange (ASX) has hit pause on a protracted project to replace its Clearing House Electronic Subregister System (Chess) with a new clearing and settlement infrastructure, based on blockchain technology.

ASX will write off between AU$245-255 million ($163-$170 million) spent on the project, which it initiated in 2017. The decision follows an independent review of the project by Accenture, which found “challenges in achieving scalability, resiliency, and supportability” and called for “significant changes to the design and implementation.”

In a statement, ASX chairman, Damian Roche, thanked customers and stakeholders for their patience and said the decision had “not been made lightly”. 

“We have concluded that the path we were on will not meet ASX’s and the market’s high standards. There are significant technology, governance and delivery challenges that must be addressed.”

He added that the existing Chess was “performing well” and would continue to receive investment, “giving us flexibility to reassess the various pathways for its ultimate replacement.”

ASX was developing the new system with blockchain infrastructure provider, Digital Asset. A spokesperson for Digital Asset told FinanceAsia that the firm was in alignment with the report’s findings, “particularly those that highlight the need for consistent business requirements, simplification in the solution design and to appoint a new ASX technology director to steward the project forward.”

The project had faced numerous delays to its initial planned launched of 2020, which was most recently postponed until late 2024. Among the reasons given, ASX noted the significance of the changes and feedback on feasibility of implementation timelines. It later identified additional development requirements and called for an independent review.

Digital Asset president, Shane Akeroyd, touted the merits of the project at last month’s Hong Kong Fintech Week, where he cited other stock exchange partnerships, including with the Hong Kong Exchanges and Clearing Market (HKEX).

The Digital Asset spokesperson said that the latest announcement does not “at all” affect the firm’s partnerships with other exchanges.

“Business growth remains strong, and many more projects are going into production in 2023, along with a strong pipeline from leading financial institutions around the world…. We will continue to work with ASX and our other enterprise customers to drive the successful innovation and adoption of distributed ledger technologies,” she added.

The replacement of Chess with a blockchain-based system would have been a first for stock exchanges globally and would have set a precedent for further integration of blockchain in capital markets. It promised to improve the speed and cost efficiency of legacy post-trade processes.

Several legal experts approached by FA declined to comment on the implications for the wider digital assets space.

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