Wells Fargo and HSBC Bank established a bilateral agreement to use a blockchain-based solution for the netting and settlement of matched foreign exchange (FX) transactions.
Through this agreement, Wells Fargo and HSBC will jointly use a shared settlement ledger to process U.S. dollar, Canadian dollar, British pound sterling and euro transactions, with plans to extend the platform to settle additional currencies in the near future. Utilizing blockchain technology, the solution will provide each bank with ongoing real-time transparency of settlement status for matched FX transactions in applicable currencies. It will also enable both parties to utilize payment-vs.-payment (PvP) settlement netting.
“We are pleased to announce that we will be utilizing blockchain technology for the first time in the settlement process of cross-border payments,” Mark Jones, co-head of macro at Wells Fargo Corporate & Investment Bank, said. “We are extremely excited to be collaborating with HSBC on a project which places both organizations at the forefront of blockchain innovation. We believe this will be the first step of many utilizing transformative technology across our industry in the years ahead.”
The banks’ shared, private ledger will use blockchain technology, applied under the framework of an agreed rulebook, to optimize PvP netting opportunities between Wells Fargo and HSBC. The banks will be able to net bilateral payment obligations and settle on a pre-agreed cadence multiple times per day within the flexibility of the settlement windows enabled by this technology. The offering builds on HSBC’s FX Everywhere platform, which has settled more than 3 million intrabank trades worth more than $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.
“As financial services continue to digitize the store of payment and value on blockchain, we are delighted to work with Wells Fargo in the adoption of this important cross-border digital backbone for the confirmation and settlement of foreign exchange trades,” Mark Williamson, global head of FX partnerships and propositions at HSBC, said. “We are excited to continue to grow the FX Everywhere network whilst ensuring that we are well placed to transact in new forms of regulated digital currencies, such as central bank digital currencies.”
The combined platform will run on Baton Systems’ blockchain inspired proprietary CORE distributed ledger technology and be governed by the Baton rulebook.
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