HSBC is leaning more heavily on blockchain-based tools to handle the fiddly processes behind foreign-exchange trades, suggesting banks are finding solid applications for a technology used in cryptocurrencies, which have been under pressure since valuations tumbled last year.
The London-headquartered bank, a heavy-hitter in forex dealing, has processed more than 3m FX transactions worth $250bn using blockchain technology in the past year, it said on Monday. That represents a tiny sliver of its overall currencies business, but still offers a rare example of a blockchain-based product that has proven its worth in wholesale finance.
Settlement provider CLS — an industry utility that ensures each side of currencies trades gets paid — launched a so-called 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, most DLT-focused start-ups have yet to come up with a product, stymied by concerns over speed and security.
Still, a number of projects are in testing mode. DTCC, a post-trade market infrastructure provider, moved its DLT project aimed at credit derivatives reporting to a trial phase in November last year. In the same month Spanish bank BBVA and two partners completed a syndicated loan on blockchain technology.
The HSBC project, known as “FX Everywhere”, has been used to co-ordinate payments across HSBC’s internal balance sheets using a shared ledger for a year. During that period it has handled more than 150,000 payments — netted down from 3m transactions — automating previously manual processes and reducing the bank’s reliance on external technology providers.
“HSBC . . . conduct[s] thousands of foreign exchange transactions within the bank, across multiple balance sheets, in dozens of countries,” said Richard Bibbey, acting global head of currencies at HSBC. “FX Everywhere uses distributed ledger technology to drastically increase the efficiency of these internal flows.”
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.