Spain Watchdog Finishes Blockchain Test
Spain’s regulator and a group of financial institutions has completed the exploration of a blockchain pilot which aims to test the distributed ledger technology for enlisting issuances of stock warrants, the former announced.
Initial results from testing the Fast Track Listing (FTL) project, a joint undertaking of the Spanish National Securities Market Commission (CNMV) and banks including Banco Santander, BBVA, BNP Paribas, CaixaBank, Commerzbank, and Société Générale, test were promising.
“After obtaining such good results, CNMV has decided to continue exploring the possible uses of this technology in its processes and carry on with the project. BME and all the national warrant issuers (BBVA, Caixabank and Banco Santander), as well as international warrant issuers (BNP Paribas, Commerzbank and Société Générale), are also actively contributing to this project,” they said.
The project revolves around a concept that shared databases can be used to better record details regarding warrants issuance, contracts holding the right to obtain new shares at a particular price before its expiration, as well as filter the information to all parties.
Banco Santander said the initiative showed the time to enlist a warrant issuance was reduced by over 70 percent using this platform. It has proven it is viable to complete the procedure in 48 hours compared with the usual time frame of more than a week, attributing it to the connection of all the systems, automatic validation of requirements, and transparency.
Moving forward, the group is now set for further proofs-of-concept around the technology. CNMV said it decided to continue looking into the likely applications of the blockchain technology in its processes and to further the program.
Despite the success, other regulators have remained skeptical about blockchain’s potential. Earlier this month, Kit Malthouse, Conservative MP of the UK House of Commons, responded to a question raised by Martin Docherty-Hughes of West Dunbartonshire about the potential applications of the technology. The representative asked the Secretary of State for Work and Pensions, what recommendations were presented to her Department following the trials which GovCoin undertook on the blockchain use for the welfare and benefits system; and whether the outcome will be revealed.
“In 2016, DWP ran a trial proof of concept on a small scale and the findings concluded that it was not viable due to limited take up potential and the expenses it would incur. No other companies were involved in the trial and no benefit or personal data was shared with GovCoin (DISC) on claimants,” Kit Malthouse said.
The statement was made noting the findings of tests using the distributed ledger technology administered by the Dutch central bank. It recognized that blockchain cannot respond to the needs of financial markets infrastructure.
Major hurdles they encountered are the following: insufficient capacity, inefficiency because high energy consumption, and lack of complete certainty on payments. Still, it appears the resilience of a financial market infrastructure against external threats could be bolstered by using blockchain although it happens at the expense of capacity and efficiency, among others.