Accenture report reveals major strains within ASX blockchain project

The release of a critical report by Accenture has raised questions over whether the proposed blockchain-based platform can cope with the expected demands on trading.

The release of a critical report by Accenture has thrown a spotlight on the strains within ASX’s links with Digital Asset Holdings and raised questions over whether the proposed blockchain-based platform can cope with the expected demands on trading.

It comes more than six years after the ASX announced plans to link up with pioneering US start-up led by Blythe Masters, a high-flying former executive with JP Morgan, where she was credited with developing credit default swaps as a financial instrument.

Not only was the ASX to be the first stock exchange in the world to move to a blockchain-based platform for its CHESS clearing and settlement system, but it would be spending $14.9m to buy a 5 per cent stake in the company with rights to step up its stake.

Ms Masters, who had taken over as CEO of Digital Asset in March 2015, less than a year before the ASX announced its proposed link up in January 2016, was feted when she came to Australia for a conference as the ASX moved further to tie its fortunes to the capacity of Digital Asset to handle such a major project. By December 2018, Ms Masters was stepping down, citing family reasons.

Blythe Masters, former CEO of Digital Asset. Picture: Hollie Adams

When Ms Masters stepped down, ASX said it remained “absolutely committed to the digital ledger technology and our partnership with Digital Asset”.

But Accenture’s report has revealed major delays in the project and strains in communication between the ASX and Digital Asset as the project has continued.

Commissioned by the ASX’s new chief executive Helen Lofthouse, after she stepped into the role in August, the report shows that only 65 per cent of the project had been handed over by Digital Asset to the ASX for testing.

This comes at a time when the ASX has already made several delays to its “go live” date for the CHESS replacement, with the last given as April next year – later indefinitely put off.

Despite years of working on the project in conjunction with stockbrokers and other participants in the market, the report says “many of the non-functional capabilities are either to be built or in build stages”. It says delays in Digital Asset shipping other aspects of the system “would have a significant impact on testing efforts and program-wide planning”.

The report describes the draft delivery plan by Digital Asset, which is 5.4 per cent owned by the ASX, as “high risk with low confidence”. It says there was a lack of internal milestones for early testing and validation needed to build confidence in the system.

The report notes that the move to a blockchain-based system introduced “higher latency” or potential delays in the system, and that there was “misalignment and frustration” about the current working model expressed by both the ASX and Digital Holdings.

While there was a “common desire” to resolve the strains, Accenture said resolving these “would require a significant pivot with strong leadership”.

It notes there was a “siloed” culture, with the ASX and Digital Asset, “rather than driving towards shared business outcomes”.

The program “lacks a holistic, agreed, single view”, it found.