HSBC and Wells Fargo wrap currency transactions with blockchain

HSBC and Wells Fargo cut an important part of the infrastructure of the foreign exchange market from some shops after the two banks had agreed to handle transactions directly via blockchain technology.

From Monday you will use blockchain technology to coordinate and pay off and to pay off shops in dollars, pounds of sterling, euros and Canadian dollars between the two banks by using the FX Everywhere platform from HSBC. The agreement means that you will bypass CLS, the almost two decades -old utility, to which the central banks urge the market participants to neutralize the risk of certain trade failures.

The step is the latest example of how blockchain technology penetrates the foreign exchange market of $ 6.6 trillion a day and redefines relationships between the large investment banks and central banks. At the beginning of this month, the central banks of Switzerland and France successfully tested the first cross -border payment on the blockchain as part of a number of projects related to digital central bank currencies.

Mark Jones, Co-Head of Macro at Wells Fargo, said it was the first time that blockchain technology would be used to handle cross-border live payments. "We believe that this will be the first step of many who will use transformative technologies in our entire industry in the coming years," he added.

he admitted that the step would exclude CLS, the institution regulated by the US Federal Reserve, which completed global currency transactions worth dollar and ensure that both sides of a trade are paid at the same time. The two banks also said that they hoped to extend the system to other banks and emerging country currencies that do not process the CLS.

Mark Williamson, Global Head of FX Partnerships at HSBC, said that the banks also spoke to financial market infrastructure operators about their possible participation. He refused to name the parties, but said that a decision would probably be made next year.

The agreement is an expansion of the plans of HSBC to use blockchain technology broader to ensure that foreign exchange transactions are correctly logged and handled after the company introduced its FX everywhere in early 2019.

By using the technology, both HSBC and Wells Fargo have real-time transparency about the settlement status of foreign exchange transactions in the four output currencies.

The growing role of blockchain in post-trade processes underlines the various ways of how banks tackle cryptocurrency and the underlying technology. Christine Moy, global director of Liinx Onyx, the blockchain department at JPMorgan, said on a panel on the Global Banking Summit of the FT that the bank is not acting with Bitcoin, but has been actively researching and searching for blockchain technology for six years.

MOY found that JPMorgan completed a blockchain-based intraday repo transaction in December and three years ago the first bank accounted to provide bank accounts to regulated crypto exchanges such as Coinbase and Gemini.

"When people think of a crypto bank, think first: do the depot, act on site? We don't.. But we support the crypto ecosystem in [different] ways," she said.

Wells Fargo will pay a small fee for the use of the platform, but the costs are probably lower than when using CLS.