Blockchain technology in the clearing and settlement industry in South Africa

Abstract

Orientation: The monopolistic nature of the clearing and settlement industry in South Africa impedes competition and the adoption of new technologies on account of profitability and total market share; there is little incentive to adopt new technologies such as blockchain. Clearing and settlement is currently administrated by shares transactions totally electronic (STRATE) using a centralised database. Blockchain technology is a decentralised advanced database mechanism allowing multiple institutional contributors to the database. Research purpose: This study’s objective was to identify perspectives on the potential role of blockchain technology in the securities clearing and settlement industry in South Africa. Motivation for the study: The emergence and adoption of blockchain technology across industries warrants research on the perceived impact of its adoption in the securities clearing and settement industry. Research design, approach and method: A qualitative research approach using semi-structured interviews was employed to collect data among stakeholders in the securities value chain in South Africa. Using social media, participants were identified through a combination of purposive and snowball sampling. Data were analysed using thematic data analysis with the aid of Atlas.ti software. Main findings: The study found that stakeholders are of the view that blockchain technology has the potential to improve settlement speed, increase automation of the process, increase efficiency, remove human error, remove the single point of failure, increase market size, create a more secure database, improve auditability, increase transparency, improve current infrastructure, eliminate intermediaries, and reduce the cost to users in the South African context. Practical/managerial implications and contribution/value-add: The contribution to practice is illustrated by two alternatives: the adoption of blockchain technology through the formation of a consortium, or a private network.

Keywords

• blockchain technology
• clearing and settlement
• securities
• central securities depository
• south africa
• jse
• distributed ledger