The Deputy Governor of the Bank of England, Jon Cunliffe, said on September 28, 2022, that using the blockchain technology that is the foundation of cryptocurrency assets to underpin quick trading and settlement across all the financial markets are not desired given the problems it would entail.
Based on the statement by Cunliffe, it is crucial to ensure that trading and settlement innovations are as huge as the current system is in the eyes of regulators, Reuters reported on Wednesday.
He stated that cash and securities on hand at the incident of a trade’s execution are important for a quick settlement. It was not yet clear how blockchain-based platforms and current technology would operate hand-in-hand.
Cunliffe was speaking at a conference held by the financial industry body AFME:
“There is simply no time to identify or rectify errors before they are actioned. In short, we may not want wholly instantaneous trading and settlement in all markets.”
The Current Setup
Today, stock and bond transactions are settled up to two business days after the transaction. It results in risky exposures and a possibility of considerable market movements in the short-term, which banks are needed to cover using cash for margin and capital.
As highlighted by Finbold, the US has established March 2024 as the main target date for minimizing this to one working day, and they are now applying pressure on Europe to implement the same.
Buy Crypto NowIn the meantime, pilot programs are now in place to test the use of distributed ledger technology (DLT) or blockchain for quick trading and settlement deals, intending to mitigate costs and risks.
It is worth noting that previously, Cunliffe had warned that the quick growth of cryptos may pose a serious threat to the established financial network, while the Bank of England also dismissed the use of a digital pound like cash in July 2022.
