ECB and BOJ publish joint research paper on Payment systems: Liquidity saving mechanisms in a distributed ledger environment

In December 2016, the Bank of Japan (BOJ) and the European Central Bank (ECB) launched their joint research project entitled “Stella”, which studies the possible use of Distributed Ledger Technology (DLT) for financial market infrastructures.

Today, they published their findings.

In the first step of their cooperation, the BOJ and the ECB conducted in-depth experiments on whether specific existing functionalities of their respective payment systems could be run in a DLT environment in an efficient and safe manner. Specifically, the liquidity saving mechanisms of BOJ-NET and TARGET2 (the Real-Time Gross Settlement (RTGS) systems of the two central banks) were replicated in a publicly available DLT application, Hyperledger Fabric version 0.6.1, and a number of tests were run.

Experiments using liquidity saving mechanisms found that DLT-based solutions could meet the current performance needs of an RTGS system. There were, however, concerns around latency.

It is concluded in the report that, while the test series produced promising results, it should be taken into account that no direct conclusions can be drawn from the test set-up with respect to a potential usage in production. Given the relative immaturity of the technology, DLT is not a solution for large-scale applications like BOJ-NET and TARGET2 at this stage of development.