South Korea watchdog: Use blockchain for stock trading
South Korea’s financial watchdog has recommended that the country introduce a blockchain-based stock trading system.
The Financial Supervisory Service (FSS) advised local regulatory agencies and companies they should work towards developing an integrated blockchain system for stock transactions. It follows a detailed analysis by the FSS of international stock exchange operators’ use of blockchain technology to date, focusing particularly on initiatives in the US, the UK, Japan and Australia.
The report found that a tamper-proof blockchain-based system would increase the efficiency, integrity and security of tracking and storing transactions, while existing conventional systems using a centralised ledger are both less efficient and more vulnerable to hacks.
“There should be no barrier between public institutions and private companies in developing a blockchain system,” the watchdog suggested.
The FSS report specifically studied US electronic exchange Nasdaq’s use of blockchain in record keeping for its private market, using the Nasdaq Linq system.
It also reviewed the London Stock Exchange (LSE) Group’s blockchain-powered platform for the issuance of private shares, as well as explorations into using blockchain for capital market infrastructure by a Japanese consortium comprised of 36 financial companies.
The most ambitious case study considered by the watchdog was the Australian Securities Exchange’s (ASX) long-term plan to replace its existing clearing and settlement system with a permissioned, distributed ledger-based alternative.
The report notes that blockchain applications in Korea are still at a relatively early stage. Planned initiatives include the Korea Exchange’s KRX Start-up Market to implement the technology for settling transactions of unlisted companies, and a blockchain trial project launched by the state-run Korea Securities Depository (KSD).
Based on its findings, the FSS pledges to “establish long-term planning and continue to promote proofs-of-concept and pilot projects on a project-by-project basis” and also to continue studying the application of blockchain in the capital markets.
In May, the FSS’s newly appointed governor, Yoon Suk-heun, said that he saw “some positive aspects” to cryptocurrencies and that improved crypto-specific regulation would encourage development of the secure financial system to make them more accessible.