HSBC Settles Bilateral FX Trades with Wells Fargo Using Blockchain Platform
(14 December 2021 – United Kingdom) In what is billed as a first for cross border payments, HSBC and Wells Fargo have agreed to settle bilateral foreign exchange (FX) transactions using a proprietary blockchain “Core-FX” platform developed by Baton Systems.
The global banking heavy weights will use distributed ledger technology (DLT) to reconcile and settle deals in USD, GBP, EUR and CAD between the their dealing desks using HSBC’s “FX Everywhere” platform.
The agreement enables the Banks to bypass CLS (originally Continuous Linked Settlement), the aging US Federal Reserve-regulated third party entity used to absorb the risk of liquidity constraints or currency trading failures by regulators and central banks allowing settlement of FX trades using real currencies and real accounts in under three minutes.
Wells Fargo will incur a small premium to HSBC for using the platform however the costs are likely to be lower than using CLS and the Banks hoped to expand the functionality to other banks and emerging market currencies that CLS does not settle.
Despite the inherent motivation behind cryptocurrency and DLT backing it to remove intermediaries from financial transactions, this move coupled with an acceleration in central bank digital currencies (CDBCs) development such as the central banks of Switzerland and France successfully executing a first cross-border payment on blockchain suggests tangible real world examples are finally coming to fruition. Blockchain is finally going “mainstream”.
“It is the first time blockchain technology has been used to settle live cross-border payments. We believe this will be the first step of many utilising transformative technology across our industry in the years ahead” commented Wells Fargo Co-Head of Macro.
“We’re also talking to financial market infrastructure operators about their potential involvement with a decision likely to come next year” stated HSBC Global Head of FX Partnerships, Mark Williamson.
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