Central Banks Eye Blockchain Technology For Securities Transactions

Central Banks Seeks Implementation Of Blockchain Technology For Securities Swaps

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  • European Central Bank investigates the potential of blockchain tech for Securities Transactions.
  • ECB partners with Bank of Japan to complete this research.

Europe: Though cryptocurrency is facing clamp down from various governments, the technology that back cryptocurrency – the Blockchain Tech – is highly appreciated and embraced. This is seen in the recent move by the European Central Bank (ECB), who is again looking into how the Blockchain technology can be harnessed to transform securities transactions. To forward this study, ECB has just concluded a new findings – the second summary – with the Bank of Japan (BoJ) this week, Tuesday, 27th March.

ECB dubbed this research, which is carried out in partnership with the BoJ, “Project Stella.” In the second summary research, the ECB looked into how the so-called distributed ledger technology (DLT) would be useful in transforming different securities transactions.

Also read: President Of Federal Reserve Bank States ‘Crypto Is Not Currency’

The first summary of Project Stella came in last Sept., where researchers at that time remained careful of the still-nascent state of distributed ledger technology and the risks associated with it.

As a result of the continuous and rapid advancement of the Blockchain tech expertise, the ECB now seems to be more positive on the prospects of a form of securities transaction called ‘delivery versus payment’ (DvP).

The project summary describes this as when operating systems “link the transfer of two assets in such a way as to ensure that the transfer of one asset occurs if and only if the transfer of the other asset also occurs.” Both the European Central Bank and BoJ stated in their report:

“DvP could be conceptually and technically designed in a DLT environment with cash and securities on the same ledger (single-ledger DvP) or on separate ones (cross-ledger DvP).”

The ‘cross-ledger’ setting denotes what is generally called ‘cross-chain atomic swaps,’ which is the transferring of value amid two discrete Blockchains, this seems to be the main goal of the Lightning Network for digital currencies.

Prior to this update, the European Commission has established a dedicated Blockchain Technology Observatory which aims at uniting innovators, businesses and regulators.

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