FSS advocates blockchain for stock trading

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FSS advocates blockchain for stock trading

Korea’s financial watchdog called on the country’s regulatory agencies and companies to work together on developing an integrated blockchain system in a study released on Thursday.

The Financial Supervisory Service’s (FSS) report focused on the use of blockchain in stock transactions in the United States, Japan and Australia.

Blockchain technology promises to offer safer and tamper-proof transactions when compared to existing transaction systems. Conventional systems require a centralized ledger to track transactions, but such systems are slow and are vulnerable to hacks.

A blockchain-based system, on the other hand, can keep a shared digital ledger of transaction data on a network of computers to ensure security and preserve transaction records more accurately while processing transactions more quickly.

The FSS said overseas stock operators are already moving forward on using blockchain to issue shares and keep records.

The London Stock Exchange Group, for instance, has built a blockchain-based platform to digitally issue private shares in small and medium-sized enterprises.

The U.S. stock exchange Nasdaq also uses the technology for secure and reliable record keeping through a system called Nasdaq Linq. The system is used for Nasdaq’s private market, where stock transactions of companies in the pre-initial public offering stage take place.

Australia is taking even bolder action, as the Australian Securities Exchange plans to replace its current clearing and settlement system with a distributed ledger-based alternative by 2021. The system, however, will be a private, invitation-only network that only authorized parties can access.

In Japan, a large consortium of 36 financial companies launched a project to explore the use of blockchain in capital market infrastructure.

The report went on to note that Korea’s application of blockchain is still in its early stages. The Korea Exchange’s KRX Start-up Market plans to embrace blockchain to settle the transactions of unlisted companies that are traded on the bourse.

Korea Securities Depository, a state-run organization that manages financial information related to securities transactions, launched a trial project to build a blockchain system using an electronic voting system used by shareholders of listed companies.

“There should be no barrier between public institutions and private companies in developing a blockchain system,” the Financial Supervisory Service said.

BY PARK EUN-JEE [park.eunjee@joongang.co.kr]
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