London-based banking behemoth HSBC announced that its blockchain-based platform reduced costs for its foreign exchange (forex) trade settlement by 25%. This news comes via a Reuters report earlier today.
According to Chief Operating Officer of FX cash trading and risk management Mark Williamson, HSBC processes between 3,500 and 5,000 trades per day on its FX Everywhere system, settling about $350 billion worth of trades.
“We [are] going at a pace now,” Williamson told Reuters. “We’re able to demonstrate that this is not a one-off proof of concept or just one or two trades.”
Indeed, most blockchain-based fintech solutions are only in the pilot phase. Notably, JP Morgan announced today it plans to release its own cryptocurrency, JPM Coin, to increase the speed and efficiency of settlements, but at first only a small amount of JPM Coin will be used to test each use case.
Although the company would not disclose exactly how much value transacted on its platform was settled using blockchain, the technology has been fully operational at HSBC for a full year; the bank claims to have processed $250 billion on the platform in that timeframe. Quite simply, HSBC is proving what blockchain proponents have been saying for years — that the technology has the ability to revolutionize the banking industry and save companies billions of dollars.
Notably, the platform uses a distributed ledger, but it is permissioned, as opposed to permissionless, as the Bitcoin blockchain and many others are. Many crypto advocates believe that only permissionless blockchains represent the full potential of the technology. Still, the fact that HSBC is using blockchain so effectively, at scale, must be accepted as a positive sign for the space.
Going forward, Williamson implied that the system would only be used more over time:
“The more participants that you have joining the HSBC shared permissioned ledger and the ecosystem, the more efficient we’re going to become in providing services to our clients.”
According to the Reuters report, HSBC is one one of a dozen banks to have launched a blockchain trade finance platform.