Bank of England says instantaneous trading and settlement too challenging | The Financial Express

Bank of England says instantaneous trading and settlement too challenging

The United States has set a March 2024 deadline for cutting this to one working day, putting pressure on Europe to follow suit.

Bank of England says instantaneous trading and settlement too challenging
Instantaneous trading and settlement too challenging, says Bank of England

Using blockchain technology which underpins cryptoassets to offer instantaneous trading and settlement across all financial markets is not desirable given the challenges it would pose, Bank of England Deputy Governor Jon Cunliffe said on Wednesday.

Cunliffe said there was a need to ensure that new approaches to trading and settlement deliver the same level of resilience that regulators expect from the existing system.

The instantaneous settlement means that cash and securities must be in place at the time a trade is struck, and it was unclear how blockchain-based platforms and existing technology would work with each other, he said.”There is simply no time to identify or rectify errors before action. In short, we may not want wholly instantaneous trading and settlement in all markets,” Cunliffe told a conference held by financial industry body AFME.

Currently, stock and bond trades are settled two business days after the transaction takes place, creating risky exposures and potential for big market moves in the meantime, which banks must cover with cash for margin and capital.

The United States has set a March 2024 deadline for cutting this to one working day, putting pressure on Europe to follow suit.

There are already pilot programmes for using distributed ledger technology or blockchain for instant trading and settlement of trades to cut costs and risks.

Also Read: EL Ninja becomes first Argentinian athlete paid in crypto

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