The paper envisages that whole classes of intermediary, such as custodians and CCPs, could become redundant, replaced by smart contracts. There is no likelihood of such an extreme revolution occurring any time soon: much more work is needed across a whole range of issues, including: speed and scaleability; confidentiality protections; developing common protocols; integrating cash and securities movements; and establishing regulatory and legal norms. In many cases, reform to outmoded business processes will need to precede any application of the technology itself. But there is clearly scope for less ambitious but still potentially transformational applications in specific markets, not least those where current infrastructure is less well developed. A key challenge for incumbent firms is whether to take on competition with challenger firms headon, or partner with them to develop and implement the most promising forms of technology internally. But doing neither is a risky approach. The final driver for change is regulation, which since the financial crisis has greatly increased the focus on centralised post-trade infrastructure as a means of promoting transparency and reducing system-wide risk. Amongst other things, banks and other financial intermediaries have been required to hold more high-quality collateral and be ready to mobilise rapidly across a wide range of businesses in response to margin calls. They have faced much stronger incentives to use centralised clearing and avoid settlement fails. And they have faced the need to support an increasing range of account types and reporting requirements. In turn, supervisors have increasingly expected infrastructure operators to act as systemic risk managers.

Frantic Treasury officials tried to correct the Chancellor’s mouse-handling technique – but they needn’t have bothered because the equipment had wisely been disconnected from anything that mattered. Indeed, CREST had already been running for some hours… Figure 1: The official launch of crest (15 July 1996)  CREST itself was far from a publicity stunt, however. Its introduction finally enabled the much-needed dematerialisation of equity settlement into electronic form, sweeping away the antiquated paper-based Talisman system, bringing some of the UK’s most important financial market plumbing into line with its front office systems, and catapulting it towards best-in-class internationally. Today, CREST accounts for half of the payments processed through the Bank’s RTGS system – around a quarter of a trillion pounds every day. BIS central bankers’ speeches  1  The launch of CREST was a particularly important moment for the Bank of England, because the team that designed and built CREST was drawn predominantly from the Bank’s own staff, hurriedly called into service after the disastrous collapse of the Stock Exchange’s own project to dematerialise equity settlement, “TAURUS”. Indeed that time also has an important place in my memories. My first job at the Bank was in its Financial Markets and Institutions Division, one of the areas from which the CREST team was taken. I vividly remember the gaping hole left in the office, complete with empty coffee cups and discarded paper files, when the team left for their new premises.