FSS Proposes Integrated Blockchain System for Stock Transactions

The Financial Supervisory Service (FSS) of South Korea has counseled local regulatory agencies and firms to work in developing an integrated blockchain system for stock transactions.

This is according to an official report published last August 2.

The FSS started a detailed analysis of foreign stock exchange operators’ use of blockchain technology, concentrating on current initiatives in the U.S., Japan, UK and Australia.

The report determined that a tamper-proof blockchain-based system would raise the efficiency, integrity and security of tracking and storing transactions. The report also indicated that current systems that make use of a centralized ledger are not as efficient and susceptible to attacks.

The FSS report particularly took a close look into U.S. exchange Nasdaq’s use of blockchain for record keeping for its private market, utilizing a system called Nasdaq Linq.

It also looked into the London Stock Exchange Group’s blockchain-powered platform for the issuance of private shares, as well as explorations into using blockchain for capital market infrastructure by a Japanese consortium comprised of 36 financial companies.

The grandest case study considered by the FSS was the Australian Securities Exchange’s plans to wholly substitute its current clearing and settlement system with a permissioned, distributed ledger-based alternative.

The report thinks that blockchain applications in Korea are still at an early stage, taking note of plans by the Korea Exchange’s KRX Start-up Market to apply the innovation for settling transactions of unpublished companies, as well as a blockchain trial project underway by the state-run Korea Securities Depository.

The FSS pledged to “establish long-term planning and continue to promote proofs-of-concept and pilot projects on a project-by-project basis, [as well as to] continue to study the [application of] blockchain […] in capital market[s].”

A few months ago, the newly appointed governor of the FSS, Yoon Suk-heun, said that he sees “some positive aspects” to cryptocurrencies, claiming that improved crypto-specific regulation “would produce” the protected financial system that would make them more reachable.