The Bank of Japan has revealed a new joint research project with the European Central Bank to study potential use-cases of blockchain technology.
More specifically, the ECB’s Directorate General Market Infrastructure and Payments will collaborate with the BOJ’s Payment and Settlement Systems Department, the latter which is already testing blockchain technology, to study “the possible use of distributed ledger technology for market infrastructure,” stated an announcement by Japan’s central bank today.
The announcement comes a day after a speech by ECB executive board member Yves Mersh, who first revealed the collaborative effort with the Bank of Japan while talking about blockchain or distributed ledger technology (DLT) and its potential with the limelight it currently holds.
Together with the Bank of Japan, we agreed to launch a joint research project which studies the possible use of DLT for market infrastructure. The project is expected to release its main findings next year.
Notably, the insights gained from the research, Mersch says, could help determine how new disruptive innovation like blockchain technology could reshape the existing and traditional global financial ecosystem. If this is to be the case, the research can also help ensure that central banks are prepared for such a change, the official added.
The blockchain-specific talk comes after the ECB revealed that it is open to taking a closer look at exploring the potential for blockchain technology as a means to further innovation among central banks around Europe.
No “Single Blockchain to Rule Them All”
The ECB’s efforts to research and understand blockchain technology will see an expansive effort as “there is no ‘single blockchain to rule them all,’” Mersh said, pointing to the multitude of blockchain development efforts across multiple industries. As a result, the ECB is considering a number of varying DLT models under development. Still, the official deemed the innovation as a technological development in its infancy.
“It cannot be stressed enough that any technology-based market infrastructure service needs to be mature enough to meet high requirements in terms of safety and efficiency,” Mersh said.
As its role as a European authority and market operator, such requirements are strictly enforced as it impacts a number of financial markets across the European Union, he stated, before adding:
Against this background, the ECB cannot, at this stage, consider basing our market infrastructure on a DLT solution.
The stance, a current one, could soon change with collaborative efforts such as the ECB’s partnership with the Bank of Japan that seek to explore blockchain’s potential for markets and even central bank-issued digital currencies.
“As new technologies don’t stop at borders, we have furthermore decided t cooperate with the Bank fo Japan to explore potential future use of DLT for central banking services in a more global context,” Mersh said.
Concluding the speech, the executive board member at the ECB stated:
We are on a journey which could radically alter the financial ecosystem as we know it.
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