intensified scrutiny on a $164 million project's collapse, with Australian authorities gathering a team of specialists to investigate the matter further, according to a news report.
Bloke Debelle, ex-deputy governor of the central bank, has been appointed to a three-member panel by the Australian Securities and Investments Commission (ASIC) to probe the collapse of ASX's blockchain-based project worth a staggering $163.1 million. This isn't your average panel, folks. They've also got Rob Whitfield, non-executive director of the Commonwealth Bank, taking the reins as panel chair. And Christine Holman, non-exec director at AGL and Collins Foods, will be joining the team too.
ASIC wants the panel to uncover the reasons behind the project's failure, looking at potential deficiencies in governance, capability, and risk management within the ASX's management. The group is expected to submit their findings and recommendations by March 31, 2026.
Now, you might be wondering, "What was this bloomin' project anyway?" Well, back in 2015, the ASX set its sights on revamping its aging CHESS (Clearing House Electronic Subregister System) with a blockchain-based system. They roped in a New York startup, Digital Asset Holdings, to make it happen. But over time, concerns were raised about the lack of market support for digital assets and the lack of proper testing for the product's scalability.
In November 2024, the ASX decided it was time to call it quits, citing issues with management, product complexity, and scalability. Oh, and the project's estimated cost? A hefty $164 million to $171 million. Yikes! The project's downfall has caused quite a stir, with more than a dozen brokers and market participants criticizing the ASX.
Despite the public scrutiny, the ASX seems to have taken the situation in stride, promising to collaborate with the panel throughout the investigation. So, buckle up, folks. It's going to be an interesting ride!
As we delve deeper, let's take a look at the background and details of this ambitious project. The CHESS replacement initiative aimed to upgrade the ASX’s market infrastructure, which had relied on a system from the 90s managing around $2.5 trillion in equities trading. The project involved developing a blockchain clearing system to enhance settlement efficiency and market transparency.
Despite a promising start, the project encountered severe technical and scalability issues over several years, combined with management shortcomings. The project eventually incurred enormous costs, with a reported financial loss of approximately $250 million following its cancellation in November 2022. The loss reflected the accumulated investment in technology development, project management, and operational expenses that could not be recovered.
The reasons for abandonment included persistent delays and significant technical problems regarding the scalability of the new blockchain system. An independent review by Accenture identified these scalability challenges that ultimately made continuing the project unviable. The ASX admitted to setbacks and delays after previously assuring the market of progress, which was later found to be misleading. The catastrophic "CHESS batch settlement failure" incident in December 2024 further exposed critical vulnerabilities within ASX’s systems, undermining confidence in its infrastructure.
The failure of the CHESS blockchain project significantly damaged public trust in the ASX and raised broader concerns about the governance of major financial market infrastructures. ASIC launched a formal inquiry into the ASX’s repeated serious operational failures, including the blockchain project collapse, noting this represented a collective failure of the ASX board and senior executives. The ASX’s misleading statements and operational shortcomings undermined investor trust and caused widespread market consequences. ASX shares declined following the announcement of the regulatory probes and the exposure of systemic failures. Regulatory repercussions included downgrading ASX’s compliance rating for operational risk to “not observed,” a highly critical classification by the Reserve Bank of Australia. ASIC also imposed a $1,050,000 penalty on the ASX for unrelated compliance breaches, adding to the reputational damage.
In summary, the ASX’s failed CHESS blockchain project serves as a cautionary tale. It highlights the risks inherent in upgrading critical legacy financial systems without sufficient technical robustness and governance oversight. The project’s downfall is a reminder of the complexity and challenges faced in integrating innovative technologies into established market infrastructures. Buckle up, folks, because this investigation promises to be a wild ride!
- Bloke Debelle, former deputy governor of the central bank, is part of a three-member panel appointed by the Australian Securities and Investments Commission (ASIC) to investigate the collapse of ASX's $163.1 million blockchain-based project.
- The ASIC-appointed panel is tasked with discovering the reasons behind the project's failure, focusing on potential deficiencies in governance, capability, and risk management within the ASX's management.
- The CHESS replacement initiative, aimed at upgrading the ASX’s market infrastructure, encountered severe technical and scalability issues over several years, combined with management shortcomings.
- The failure of the CHESS blockchain project, which incurred a financial loss of approximately $250 million, significantly damaged public trust in the ASX and raised concerns about the governance of major financial market infrastructures.
- The investigation into the ASX's failed blockchain project is expected to submit findings and recommendations by March 31, 2026, providing insights into the crypto, finance, and business industry's approach to blockchain technology and risk management.
