Japan Exchange Group (JPX) has published a working paper that focuses on the trends in technological development and some issues with utilizing distributed ledger technology (DLT) in the capital market.

JPX established a research group in 2015 and has studied the applicability of DLT on capital market infrastructure. The findings and analysis were subsequently published in a report in August 2016.

Titled “The Trend of Exploring the Use of Distributed Ledger Technology in the Capital Market”, the current paper outlines the functions of existing DLT platforms including Hyperledger Fabric, Corda, and Quorum, discusses distinctive features of DLT in the financial indsutry, and makes comparison with existing technology. The authors note:

“Since DLT platforms for capital markets have been evolving far from the original concept of DLT to satisfy the practical requirements of financial institutions, there has been opinion that these platforms are not much different from existing technologies...We believe that steadily evolving financial services by implementing new technologies for production use in this industry is essential, even if the new technologies are not very different from existing technologies.”

The paper further pointed out that there has been a shift in the efforts to implement DLT to capital markets from revolutionary use cases inspired by cryptocurrencies to realistic ideas. It added:

“Enthusiasm has faded slightly due to the shift, and there has been concern that efforts by financial institutions would shrink gradually. Such ups and downs in expectations can happen in the process of developing any new technology, and it is necessary to continue exploring DLT for the medium and long term in view of the push in the Fintech movement for more sophisticated financial services.”

Earlier in March, JPX started a initiative that officially accepts participation from a wide range of Japanese financial institutions for industry-wide cooperation such as joint PoCs. The participants or other IT vendors can also suggest use cases related to the capital market.

According to the paper, 33 participating financial institutions have been able to communicate with each other on a consortium-members only website for discussion and information sharing on DLT. Also, two of the suggested ideas have been escalated to the stage of joint PoCs among interested financial institutions within the scope of JPX’s initiative.

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