At the World Forum of Central Depositories, taking place online this week, a panel addressed the challenges of creating a DLT market infrastructure – an exercise in which both ASX and SDX are well advanced.
Responding to a question on whether central bank digital currencies (CBDCs) are a necessary catalyst for the complete adoption of DLT in market infrastructure, Timothy Hogben, group executive, ASX, noted that having cash on the ledger enables participants to have transparency across securities and money, “which has been one of the challenges in achieving simultaneous DVP.” A CBDC would be a big help in that regard, he suggested.
Jens Hachmeister, managing director – issuer services & new digital markets, Deutsche Börse, agreed, though adding that CBDCs were only part of the solution. “We need a broad range of accepted payment solutions to enable DVP on-chain,” he said.
Head of legal and compliance at SDX, Immaculada Navas, pointed out that in SDX’s experience even if an asset is tokenised and asset-backed, banks sometimes have a requirement to be able to tokenise and detokenise in real time to ensure that a position does not remain in the system overnight. Having a CBDC on the platform eliminates the perceived risk of doing so, she suggested, regardless of the safety of the system itself.
A dissenting voice came from Angus Scott, co-founder and chief executive of Artclear, which is developing a digital market infrastructure for the art market. “Cash has a very much broader role in society, so saying cash over ledger for DVP is the tail wagging the dog,” he argued. “You can integrate things without having to actually create this new financial instrument called central bank digital currency, which opens a whole new can of worms.”
At the recent World Economic Forum in Davos, it was suggested by the Atlantic Council that 87 countries (representing over 90% of global GDP) are exploring a CBDC, up from 35 countries in May 2020. However, this is yet to translate to an increased rollout of launches. Nine have launched to date, the latest being Nigeria.
In April, the UK Treasury announced plans for a regulatory sandbox for financial market infrastructures using DLT to be operational by 2023.