HSBC and Wells Fargo are cutting out a key part of the currency market’s infrastructure from some trades after the two banks agreed to settle transactions directly on blockchain technology.
From Monday, they will use blockchain technology to reconcile and pay out on deals in dollars, sterling, euro and Canadian dollars between the two banks, using HSBC’s FX Everywhere platform. The agreement means they will bypass CLS, the nearly two-decades-old utility that central banks urge market participants to use to neutralise the risk of certain trade failures.
The move is the latest example of blockchain technology seeping in to the $6.6tn-a-day foreign currency market, and resetting relationships between the big investment banks and central banks. Earlier this month, the central banks of Switzerland and France successfully tested the first cross-border payment on the blockchain as part of a series of projects around central bank digital currencies.