Blythe Masters, chief executive officer of Digital Asset Holdings LLC, gestures as she speaks at the Bank of England Open Forum at the Guildhall in London on Wednesday, Nov. 11, 2015. The Open Forum is a conference on the role of markets in society that's being attended by officials, academics, religious leaders and members of the public. Photographer: Simon Dawson/Bloomberg
Blythe Masters stepped down as Digital Asset Holdings chief in December © Bloomberg

A grand plan to apply blockchain technology to the world of securities and trade settlement appears to be stalling, with Digital Asset Holdings, one of its key proponents, switching its focus to so-called “smart contracts”.

DAH, previously fronted by Blythe Masters, the former JPMorgan Chase executive credited with pioneering the market for credit-default swaps, ​had promised to revolutionise finance by applying the distributed ledger technology backing cryptocurrencies to activities such as trade clearing and settlement.

Instead, DAH is ramping up its focus on smart contracts, which use similar code to that used in automated transactions such as direct debits and standing orders. ​ ​Any blockchain-enabled financial settlement system is likely to be highly dependent on smart contract technology.

The shift comes as Germany’s central bank expressed doubts about blockchain’s potential, relative to existing technologies.

“The market is evolving to a place where we see the ledger platform becoming a place that is going to be very difficult for us to compete in,” a spokesperson for DAH said, adding the group had also recognised that customers were fearful of being locked into any specific platform.

Ms Masters had told bankers in 2015 that blockchain was analogous to “email for money” and that the world should be “​taking this technology as seriously as you should have been taking the development of the internet in the early 1990s”.

She stepped down from her position as chief in December 2018 for personal reasons, stirring concerns that blockchain’s promise may struggle to live up to expectations. She remains a board member, adviser and investor in the company.

Other notable departures from the company over the past six months include Stewart Cowan, brought in last April to oversee DAH’s development of a blockchain-based clearing and settlement system for the Australian Securities Exchange (ASX) and Gavin Wells, the former LCH executive who was its head of Europe.

A hint that DAH was edging away from blockchain ​came in April​ when the company announced it would be making its smart contract language, known as DAML, easier to integrate with rival blockchain platforms such as Hyperledger.

DAH’s chief Yuval Rooz stressed the company remained committed to blockchain but confirmed that increasing standardisation across the industry had started to commoditise the business, challenging the potential to generate revenue from blockchain alone. “We are focusing on where the value is for us, as well as where we think we have an immediate advantage with DAML,” he said.

In a surprise move, policymakers recently poured cold water on the capacity for blockchain technology to revolutionise trade processing. Bundesbank president Jens Weidmann told a symposium in May that tests run with Deutsche Börse, Germany’s largest exchange, had shown the technology was sometimes slower and more expensive to use. “A real breakthrough in application is missing so far,” he added.

The ASX, which has invested more than A$20m in DAH, said its project to upgrade its domestic settlement system using Digital Asset Holdings’ technology remained on track.

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