The Australian Securities Exchange (ASX) has announced that US-based blockchain firm Digital Asset will be responsible for replacing its Clearing House Electronic Subregister System (CHESS) with a distributed ledger solution.
The organisation has been planning to replace or upgrade its trading and post-trade platforms for over two years, announcing in September 2016 that it had a complete prototype and was moving to build an "industrial-strength solution" to use as its equity settlement and clearing platform.
"After so much hype surrounding distributed ledger technology, today's announcement delivers the first meaningful proof that the technology can live up to its potential".
"ASX has been carefully examining distributed ledger technology for nearly two-and-a-half years, including the last two years with Digital Asset, in order to understand its potential application", ASX CEO Dominic Stevens said in a statement.
Blockchain of course is a digital technology for recording and verifying transactions.
The transition is expected to start next year, with the timing to be decided around the end of March.
DLT brings tremendous value and will provide a standardised structure to synchronise the different systems or databases participants use, as well as instantly eliminate reconciliation issues, he said, adding blockchain technology is not as a bigger risk others may perceive it as.
Peter Hiom, ASX Deputy CEO, said: "ASX has consulted extensively on the needs and priorities for replacing CHESS, including with customers, share registries, software vendors, other exchanges and industry associations".
On Thursday, the ASX said it will now work with stakeholders on finalising the scope of Day 1 functionality for the new system.
The Exchange has so far given given over 80 DLT system demonstrations to more than 500 attendees, and conducted over 60 Chess replacement workshops for more than 100 organisations from across the financial services industry. This followed the ASX enlisting Digital Asset at the start of previous year to help it develop blockchain solutions for the equity market.
Australia has made Fintech innovation, which includes Blockchain, a pillar of its strategic vision for its future economy.
And ASX said the new system would save money going forward.
Treasurer Scott Morrison said the roll out is consistent with the Government's agenda to put Australia at the forefront of financial technology and efficient financial markets. "Developing this sector will drive a stronger economy, a more competitive market for consumers and more and better paid jobs".