Shanghai Bourse Eyes DLT for Securities Transactions

The Shanghai Stock Exchange, which boasts a market capitalization exceeding $5 trillion, is keen to implement blockchain for securities transactions.

The Shanghai Stock Exchange (SSE), the fourth largest stock exchange in the world, is interested in implementing the distributed ledger technology (DLT), better known as blockchain, in securities transactions. The bourse’s operator published earlier this week a report analyzing the benefits of the technology and its use in the multiple phases of a securities transaction, including pre-trading customer registration, issuance and trading of securities and after-trading settlement process.

SSE noted that the use of blockchain would be beneficial for China’s fiscal system as DLT would secure more rapid and efficient settlements.

However, the report also noted that the implementation of blockchain in China is facing a number of difficulties, mainly due to the current regulation, which requires a centralized registration and custody of securities. Blockchain, on the other hand, eliminates intermediaries and centralization.

SSE calls on national regulators to watch the development of DLT and come up with regulatory updates when needed. According to the bourse operator, the blockchain is still at its nascent stage and needs to pass the testing stage.

“Part of the market is now starting to adopt this technology in part, and larger-scale industry applications will do so after a few years,” the SSE said.

Last year, China banned local cryptocurrency exchanges and initial coin offerings (ICOs) and eventually decided to crack down cryptocurrency peer-to-peer trading in general. However, the government makes a distinction between cryptocurrencies and the technology that underpins them. Thus, blockchain has right of existence in China. The state-backed IT news outlet CCID even started publishing official ratings of blockchain projects, while the government has pledged to come up with blockchain implementation standards in 2019.