South Korea’s financial investment industry is starting to make moves to apply blockchain technology to capital market.
Korea Securities Depository (KSD), which is a main infrastructure government agency of capital market, also decided to see whether blockchain technology can be applied to securities settlement systems.
It is expected that blockchain technology will be applied to liquidations and settlements that occur from unlisted bonds.
KSD made an announcement that it will start a consulting process for PoC (Proof of Concept) about unlisted bond settlement models that are based on blockchain technology starting from the middle of June. It is going to decide on whether blockchain technology can be applied to capital market based on results from its consulting. PoC process is a process that confirms performance and functions of new technologies that did not exist before.
“Although there have been basic discussions within universities, this consulting is meaningful from a standpoint that it is the first official attempt to look for possibilities of applying blockchain technology to securities settlement systems.” said President Lee Byung-rae of KSD.
Through this consulting, KSD is going to find out what is the most suitable blockchain platform for current unlisted bond settlement services and look for unlisted bond settlement models that are most suitable to South Korean laws and system. It is going to review various scenarios such as forgery and hacking of details of transactions and deadlock of settlements.
Financial investment industry has been predicting that blockchain technology will be applied to unlisted bond first out of all major tasks of capital market.
Because unlisted bond markets are mostly composed of institutional investors rather than personal investors, they are relatively free from speed and others that have been pointed out as problems of blockchain. Interests from participants are also lesser than other capital markets. Other countries such as Australia and Canada are also attempting to apply blockchain technology to liquidation and settlement areas of their stock markets.
Next task of blockchain consortiums of South Korea’s financial investment industry that previously introduced a co-authentication platform is also to apply blockchain technology to unlisted bonds and liquidation and settlement. KOSCOM also looked into a possibility of applying blockchain technology to unlisted bonds through PoC.
Most of supplies of unlisted bonds that are distributed within South Korea currently are dealt through ‘K Bond’, which is operated by Korea Financial Investment Association. These bonds go through KSD and The Bank of Korea at the same time to have their liquidations and settlements to take place through K Bond. Goal of KSD’s consulting is to look for a possibility of applying blockchain technology to these processes.
“We are going through a consulting to find out which blockchain platform out of Hyperledger, R3, Ethereum, and others is the most effective to our services.” said a representative for KSD. “We are also going to have talks with relevant industries actively about things that we need for actual services.”
Staff Reporter Ryu, Geunil | ryuryu@etnews.com