The ECB and Bank of Japan's first "Project Stella" Report: How will this impact FinTech and financial market infrastructure in the EU-27 and the Eurozone's Banking Union?
On 5 September 2017, the European Central Bank's (ECB), acting in its central bank and not its supervisory role, together with the Bank of Japan's (BOJ) published a joint research report: "Payment systems: liquidity savings mechanisms in a distributed ledger environment" (the September report). This publication is timely in as much as it is forward-thinking in its findings and proposals. This Client Alert provides an evaluation of the September report and how "Project Stella", a joint research project that was set up by the ECB and BOJ in December 2016 might shape the future of financial markets. Whilst promising, Stella's September report tempered any prospect of immediate replacement by stating that: "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 this development." As Stella continues to progress and FinTech comes of age, this initial conclusion might change.