​ASX wants market feedback on its blockchain platform

The Australian Securities Exchange has launched a showcase space at its Sydney headquarters to gather feedback from the market on blockchain technology, which it plans to use to develop its new post-trade platform.
Written by Aimee Chanthadavong, Contributor

The Australian Securities Exchange (ASX) is currently in the midst of building a new post-trade solution using blockchain technology, and is looking for market feedback.

The organisation has built a dedicated showcase space, dubbed acceler8, at its Exchange Centre in Sydney to demonstrate how the blockchain platform will work, and to gather feedback from visitors.

"Our first aim must be to fully assess the technology. There are important questions regarding scalability, security, and performance that must be answered. And we must ensure that the current processes of our equity market can be performed by the new platform," said Peter Hoim, deputy CEO of the ASX, during a speech at the 2016 Stockbrokers Conference in Melbourne.

"We must also engage with you, our customers, to ensure the platform meets your requirements -- both existing and new -- and with regulators to ensure we continue to comply with the highest regulatory and operational standards."

At the start of the year, the ASX enlisted US-based firm Digital Asset to help it develop solutions for the Australian equity market using blockchain technology, the underlying system that facilitates transactions such as bitcoin trading.

The announcement was part of the ASX's plans, which it revealed last February, to replace or upgrade all of its main trading and post-trade platforms.

In providing an update on the progress of developing the new post-trading platform, Hoim said the two companies have now begun "an intensive period of development to create a blockchain platform to test and demonstrate the capabilities of the technology", and expect to make a final decision on the post-trade infrastructure in 2017.

Hoim believes adopting blockchain in Australia's financial markets will strengthen the market's global competitiveness.

"We believe the potential of the technology to improve post-trade efficiency and reduce costs is genuine. Our market is a complex organism, and there is a terrific opportunity for us to simplify how it works. In doing so, we can unlock a new era of collaboration and innovation," he said.

In March this year, the Australian government announced plans to remove the "double tax" treatment from those dealing in digital currency such as bitcoin.

In its report, Backing Australian FinTech, the government said it recognises that that the current treatment of digital currency under the Goods and Services Tax (GST) law means that consumers are double taxed when using digital currency to buy anything already subject to GST.

According to the government, blockchain technology -- the underlying technology behind bitcoin -- has attracted considerable interest and is currently being applied to a number of areas within the international financial system. The government believes the technology has the potential to revolutionise key services like international transfers between banks, equities clearing and settlement, and financial contracts.

The federal government reaffirmed its plans for removing the double tax treatment as part of the 2016 Budget.

It released its GST Treatment of Digital Currency consultation paper that stated three options for changing how the GST impacts digital currencies: Input tax treatment similar to the UK and Europe where bitcoin is regarded as akin to share trading, loans, or exchanges of foreign currency; changing the definition of money in the GST Act to include bitcoin; or explicitly stating that bitcoin is GST free in the same manner that food is GST free.

However, the government said it needs to first work out a Goldilocks definition of digital currency that is suitable for it -- whether it be principles-based, or an explicit list of currencies that meet the definition.

Following the small mention in the federal government's Budget, Data 61, together with government agencies including Treasury, announced they were going to examine what blockchain technology could mean if it were adopted by both government and industry in Australia.

Similar discussions have previously been raised by the chairman of Australian Securities and Investment Commission Greg Medcraft, who has said the emergence of blockchain technology could -- if it takes off -- have the potential of changing the existing financial system.

"Naturally, harnessing this potential will depend on the integrity, capacity, and stability of blockchain technology and processes," he said.

"It will also depend on industry's willingness to invest in, and make use of, new ways of settling and registering transactions. The potential is, nonetheless, enormous. Industry is seeing that potential and is looking to see how it and the markets might benefit."

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