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September 7, 2017

ECB, Bank of Japan say blockchain technology immature to replace settlement systems

The European Central Bank (ECB) and the Bank of Japan have concluded that distributed ledger technology (DLT) is currently not mature enough to be used for large-scale applications such as real-time gross settlement (RTGS) systems.

The decision follows a research of DLT, which was launched by the regulators last year to explore its viability in the financial market system.

The project included the replication of the liquid saving mechanisms of Eurosystem’s RTGS TARGET2, and Bank of Japan’s RTGS BOJ –NET in publicly available DLT application, Hyperledger Fabric version 0.6.1.

Through the study named Project Stella, the regulators highlighted that DLT-based solutions could comply with RTGS system’s performance requirements.

The study also revealed that network size and node distance impact DLT performce, with payment processing likely to take more time if network is bigger and distance between network nodes is longer.

“In conclusion, while the test series produced promising results, it should be taken into account that no direct conclusions can be drawn from the test set-up with respect to a potential usage in production. Given the relative immaturity of the technology, DLT is not a solution for large-scale applications like BOJ-NET and TARGET2 at this stage of development,” ECB said in a statement.

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