Wells Fargo, HSBC to Settle Forex Transactions Using Blockchain

Two banking titans have agreed to settle foreign exchange transactions through a blockchain-based solution, according to a new announcement.

In a press release, Wells Fargo and HSBC say the two giants will be utilizing a new platform to process US dollar, Canadian dollar, British pound sterling and Euro transactions with plans to branch out to other currencies in the near future.

The platform will run on Baton System’s blockchain-inspired CORE distributed ledger governed by the Baton Rulebook, a framework designed to provide legal certainty around settlement finality.

According to the announcement, the solution will provide each bank with constant real-time transparency of settlement status for matched FX transactions, and enable both parties to use Payment-vs-Payment (PvP) settlement in order to reduce exchange risks and costs.

Arjun Jayaram, CEO and Founder of Baton Systems said:

“This development is hugely significant for the entire FX market, as it offers firms the opportunity to really address settlement risk – arguably the most critical control issue impacting post-trade today.

“Today’s announcement demonstrates the tremendous potential this technology presents to FX market participants globally to improve their risk management, intraday liquidity controls and funding profiles. Using proven technology that is readily available today, banks can now take control and completely revolutionise their entire post-trade process from trade-capture through to settlement.”

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Founded in 2016, Baton Systems operates with a bank-focused narrative similar to Ripple and XRP. In 2018, the Bank of England used Baton Systems to test out its Real-Time Gross Settlement (RTGS) platform. The firm’s systems have been used by other global banks, exchanges and clearinghouses.

According to the banks, the new settlement system will build on HSBC’s FX Everywhere platform which has reportedly settled over $2.5 trillion since going live in 2018.

“Based on the results of this arrangement, the parties hope to expand the system to add more participants and to introduce a central Financial Market Infrastructure (FMI) provider to administer the platform rulebook.”