Research and development into distributed ledger technology based applications are progressing in full swing. But when it comes to adoption, it may take a while before the banks – at least the ones in Europe – are convinced about its reliability. The message was put across earlier today by a representative of European Central Bank (ECB) in Geneva.
While attending the annual Sibos event, Yves Mersch, a member of the ECB’s executive board, voiced his concerns about blockchain technology’s hurried integration in trading and banking sectors.
He stated:
“… the Eurosystem cannot, at this stage, consider using DLT [Distributed Ledger Technology] in the market infrastructure. “
According to Mersch, the distributed ledger technology is still in its infant stage, and exists without being tested on legal, regulatory, and operational procedure. All the financial and regulatory systems are based on conventional economic systems and DLT by itself is quite disruptive, which may end up creating conflicts between operations and regulations.
Also, there is no unified blockchain based solution available yet. In the absence of standardization, haphazard implementation of different DLT solutions by banks and markets may lead to market fragmentation instead of integration.
While standardization or lack thereof is one end of the problem, another end of the spectrum concerns the reliability of various blockchain and smart contract protocols. The vulnerable side of blockchain technology and smart contracts was revealed last week after Ethereum was targeted by two DOS attacks within a span of few days.
Ethereum has been one of the forerunners in blockchain protocols. It has been instrumental in promoting the use of blockchain technology in fintech sector.
In the current situation, the developers of these blockchain protocols can start working on creating universal blockchain standards and improving the security of their platforms. Such developments can potentially accelerate the rate of adoption of digital currency technology in the coming days.
Ref: Finextra | Image: The Telegraph UK