Australia’s Securities and Investments Commission (ASIC) has taken legal action against the Australia Securities Exchange (ASX) Ltd., alleging that the ASX made false statements regarding its blockchain trade settlement project. ASIC claims that the ASX misled the public by stating that the project was on track for a launch in April 2023 and was making progress, when in reality, the project was facing significant challenges and was eventually canceled.
The ASX’s blockchain initiative was intended to replace the Clearing House Electronic Subregister System (CHESS). However, ASIC revealed that the project was halted in November 2022 due to design issues, and the ASX incurred costs of AUD250 million as a result. The regulator further stated that the project was already in trouble as of February 2022, contradicting the ASX’s positive updates.
The delay and ultimate cancellation of the blockchain project led to substantial losses for the ASX and its market participants. ASIC Chair Joe Longo expressed disappointment in the ASX’s failure, emphasizing the impact on market integrity and the reputations of the ASX board and senior executives. Longo stressed the importance of accurate information in decision-making for market participants and highlighted the wide-ranging implications of the ASX’s mismanagement.
In response to ASIC’s allegations, ASX CEO Helen Lofthouse stated that the company is reviewing the legal proceedings and acknowledges the seriousness of the situation. She affirmed the ASX’s commitment to its role in Australia’s financial markets and its dedication to customer support and progress as an organization. Despite ASX’s recent penalties for compliance lapses, the company remains focused on moving forward and improving its operations.
ASIC is seeking declarations, pecuniary penalties, adverse publicity orders, and costs against the ASX as part of the lawsuit. The outcome of the legal battle between ASIC and ASX will have significant implications for the future of the ASX and the broader financial market in Australia. The case highlights the importance of transparency and accountability in the financial sector and underscores the regulatory challenges faced by companies operating in complex and rapidly evolving industries like blockchain technology.
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