ECB: Blockchain ‘Not an Option’ for Central Bank Services

Dirk Bullman, an advisor to the director general, payment systems and market infrastructure at the European Central Bank (ECB), said that while the institution would continue to examine the applications of blockchain, it did not meet the required standards for implementation yet and was “not ready for prime time.”

“What we offer, as a service in Europe, is the backbone of the financial sector, and the implementation of monetary policy,” Bullman said. “It has to meet high security standards, high efficiency standards, and we quickly came to conclude that blockchain technology is not as mature as we had maybe hoped.”

He added that the ECB was “still exploring it” but at this point the bank had reached the conclusion that “blockchain is not an option for our services.”

Bullman made the comments on a panel at the annual Sibos conference, held in Toronto on October 16.

Enthused

On the same panel, while other experts enthused about blockchain’s potential, they also questioned whether the market was ready for an overhaul of its technology at a fundamental level, which would have extraordinary impacts on the processes currently in place within the post-trade environment.

“With blockchain, yes, we can do instant settlement, but as an industry, we’re not ready for instant settlement,” said Alexis Thompson, head of global securities services at Spanish bank, BBVA. “We’ve reduced from three to two days, and now we’re talking about milliseconds. Blockchain can do that—I think the technology we have can probably do it as well. But operationally, we’re not ready for that.”

Thompson also pointed to the fact that large-scale projects such as Target2-Securities had sucked up “billions” of dollars collectively across the industry, and were set in motion before blockchain had really emerged, and those investments “have to be paid off before going on to other things.”

“If I go back now to my firm and say, ‘we’ve spent millions and now we’re going to throw it all away because we’re moving to blockchain,’ I think they’re going to look at me as if I’m a bit of a madman,” he said. “We’ve made an investment—it was a huge investment—and now we have to make that work.”

Others suggested that blockchain implementation is still possible—just on a smaller scale than some of the more ardent enthusiasts had suggested. Tom Castelyn, head of product management for custody, cash and foreign exchange at BNY Mellon, said there was little debate “about the end goal,” but that it was a matter of timing.

“The best thing we can do now with blockchain is take very discrete elements of our settlement ecosystem—like secured loans, trade finance, or the gold settlement market—and try to solve for those in a blockchain pattern,” he said. “The one thing I can say, from being in this market for 25 years, is that it doesn’t move very fast. And rightly so—we deal with a lot of assets, and it has to be very careful, very deliberate, and very risk averse. It’s a question of timing.”