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Bank of England says blockchain roll-out across all markets too challenging

FILE PHOTO: Britain's Deputy Governor of the Bank of England Jon Cunliffe speaks during the Bank of England's financial stability report at the Bank of England in the City of London

By Huw Jones

LONDON (Reuters) -Using blockchain technology which underpins cryptoassets to offer instantaneous trading and settlement across all financial markets is not desirable given the challenges it would pose, Bank of England Deputy Governor Jon Cunliffe said on Wednesday.

Cunliffe said there was a need to ensure that new approaches to trading and settlement deliver the same level of resilience that regulators expect from the existing system.

Instantaneous settlement means that cash and securities must be in place at the time a trade is struck, and it was unclear how blockchain based platforms and existing technology would work with each other, he said.

"There is simply no time to identify or rectify errors before they are actioned. In short we may not want wholly instantaneous trading and settlement in all markets," Cunliffe told a conference held by financial industry body AFME.

Currently, stock and bond trades are settled two business days after the transaction takes place, creating risky exposures and potential for big market moves in the meantime, which banks must cover with cash for margin and capital.

The United States has set a March 2024 deadline for cutting this to one working day, putting pressure on Europe to follow suit.

There are already pilot programmes for using distributed ledger technology or blockchain for instant trading and settlement of trades to cut costs and risks.

(Reporting by Huw Jones;Editing by Alison Williams and Frank Jack Daniel)