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HSBC leads the way in forex transactions using blockchain

blockchain - shipping and freight resourcePreviously we shared an article about India’s first blockchain enabled Letter of Credit and also the First blockchain enabled trade finance transaction.. Both of these activities were carried out by HSBC..

HSBC seems to be leading the way in terms of blockchain-based tools to handle financial processes relating to foreign-exchange trades..

HSBC, now based in London announced that they have settled more than 3 million forex transactions and made more than 150,000 payments worth $250 billion using the distributed ledger technology (DLT)..

The solution, called HSBC FX Everywhere, has been used in the past year to handle payments across HSBC’s internal balance sheets, creating significant efficiencies and opportunities, said HSBC..

Using a shared permissioned ledger, which provides singularity, transparency, and immutability, it transforms the process around intra-company foreign exchange activity, automating several manual procedures and reducing reliance on external settlement networks..

As per HSBC, the key benefits of this process include:

  • Singularity, transparency, and immutability. A shared, single version of the truth of intra-company trades, from execution through to settlement, which reduces risk of discrepancy and delay
  • Payments orchestration. Confirmation and settlement is automated by matching and netting transactions, which reduces costs and reliance on external settlement networks
  • Balance sheet optimisation. A consolidated, global view of forward cash flows, and certainty of funds throughout the funding cycle, and supports greater balance sheet optimisation

Richard Bibbey, Interim Global Head of FX & Commodities at HSBC, said:

The global, cross-border nature of HSBC and its clients sees us conducting thousands of foreign exchange transactions within the bank, across multiple balance sheets, in dozens of countries. HSBC FX Everywhere uses distributed ledger technology to drastically increase the efficiency of these internal flows.

“Following successful implementation inside the bank, we are now exploring how this technology could help multinational clients – who also have multiple treasury centres and cross-border supply chains – better manage foreign exchange flows within their organisations.

The adaption of this technology and the success that HSBC has enjoyed, indicates that financial institutions including banks are finding solid applications for the DLT technology and maybe this blockchain-based product is proving its worth in wholesale finance..

Financial Times reports that a few other financial institutions such as

  • Settlement provider CLS — an industry utility that ensures each side of currencies trades gets paid ;
  • DTCC, a post-trade market infrastructure provider ;
  • Spanish bank BBVA

are all working on similar projects using DLT and Blockchain..

As per FT, CLS launched a distributed-ledger technology platform in November last year with Goldman Sachs and Morgan Stanley, but after an initial flurry of hype surrounding the potential for the technology, there seems to have been a slow down due to worries over security and speed..

DTCC, a post-trade market infrastructure provider, moved its DLT project aimed at credit derivatives reporting to a trial phase in November 2018.. Spanish bank BBVA and two partners completed a syndicated loan on blockchain technology also in November 2018..

Multiple executives at the bank can simultaneously use the system to view trades from execution to settlement, reducing the risks of discrepancy and delay, the bank said.. The platform has reduced HSBC’s spending with CLS, the bank added..

HSBC now plans to make its platform available to clients, particularly companies that manage a number of treasury centres and cross-border payments…

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