The Bank of Japan and the European Central Bank have released a joint report that details the findings of Project Stella, which explores the usability of blockchain and distributed ledger technology (DLT) for financial market infrastructures.
The two central banking authorities joined forces last year for the project. Titled "Payment systems: liquidity saving mechanisms in a distributed ledger environment”, the report is the first outcome of the collaboration.
The joint analysis found that DLT-based solutions could meet the performance needs of a Real-Time Gross Settlement (RTGS) system and could strengthen resilience and reliability. The report also states that DLT performance is affected by network size and distance between nodes.
The report said:
“Findings in relation to efficiency show that, with regard to the specific aspects of RTGS services tested to date, a DLT-based solution could meet the performance needs of current large value payment systems. Given the nature of DLT arrangements, in which the process of validating transactions and reaching consensus is more complex than in a centralised system, this is encouraging evidence.”
The project involved the replication of the liquidity saving mechanisms of BOJ-NET and TARGET2 (RTGS systems of the two central banks) in a publicly available DLT application, Hyperledger Fabric version 0.6.1, and a number of tests were run. Although the banks said that they found encouraging evidence, yet in an accompanying statement they said:
“In conclusion, while the test series produced promising results, it should be taken into account that no direct conclusions can be drawn from the test set-up with respect to a potential usage in production. Given the relative immaturity of the technology, DLT is not a solution for large-scale applications like BOJ-NET and TARGET2 at this stage of development.”
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