A new report from financial giant Japan Exchange Group (JPX) contends that distributed ledgers will work "better" when applied to capital markets if third parties are involved. The finding comes from a 27-page working paper , released yesterday, in which JPX offered insights into its proof-of-concept efforts, as well as the key takeaways from its experiments. For JPX, the report is the latest product of its deepening interest in blockchain, following a partnership with IBM announced in February . Given that the bitcoin blockchain was designed to remove third parties from online transactions, the proposition that derivative technologies will be more effective without this feature is likely to emerge as a controversial one. Still, JPX’s report argues that it’s necessary for financial institutions to pursue this architecture as a means of guarding against the risk that blockchain data is accessible to other financial institutions who might be using a shared ledger. The report reads: "Considering these concerns or business requirements, it is preferable that all stored data is only accessible by related parties. Since this will lose the feature of ownership certification by public trust, nobody can validate his/her claim of securities ownership. Therefore, full data access privilege needs to be given to a trusted third party who is responsible for the ownership certification." JPX revealed that during its proofs-of-concept, central securities depositories played the role of a certification authority, a system that it believes will be as secure as the decentralized version employed by the bitcoin blockchain at scale. Other entities that could come to facilitate blockchain transactions include regulators and IT vendors, it said. The authors go on to assert that having a third party will also mitigate the risk of settlement failures, arguing it could mediate situations between buyers and sellers in which gridlock emerges due […]
