With 2021 coming to an end, blockchain technology is still holding on to its place as one of the most exceptional technological concepts.
Now, two of the world’s biggest and most popular banking institutions are adopting the technology as they hope to bring faster foreign exchange transactions to their customers.
Making Cross-Border Transactions More Seamless
Earlier this month, banking giant Wells Fargo announced that it has partnered with HSBC - another large bank - to use blockchain for settling bilateral foreign exchange transactions. The announcement explained that both firms will use FX Everywhere - a blockchain platform developed by HSBC - to settle these transactions.
Developed in 2018, FX Everywhere is a blockchain platform that was initially used to settle transactions within the banks in the HSBC group. To date, the platform has settled over 3 million transactions, totaling over $2 trillion in volumes. Now that the conglomerate is partnering with Wells Fargo, this will mark the first time that FX Everywhere will be used for external purposes.
Under this partnership, both banks will be able to settle transactions in top currencies like the dollar, the British pound, the Canadian dollar, and the Euro. Wells Fargo also pointed out that the platform will eventually expand to support other fiat currencies in the future.
“The platform enables participants to efficiently settle bilateral cross border obligations across multiple onshore and offshore currencies, coupled with the added flexibility of extended settlement windows to optimize PvP risk reduction opportunities,” said Mark Williamson, HSBC’s global head of FX Partnerships and Propositions.
Williamson explained that blockchain technology can help to bolster transaction efficiency and reduce overall costs for interbank transaction settlement. In the initial partnership stages, the platform will be tested with about 100 transactions weekly. They’ll grow from there once the platform shows signs of scaling.
Two Banks With Differing Views on Crypto
As tithings stand, it would appear that Wells Fargo and HSBC are simply using blockchain for their transaction settlement benefits - not because it is tied to cryptocurrencies. Both banks have had differing views about cryptocurrencies in the past, with HSBC especially being anti-crypto.
In April, the bank was reported to have blacklisted trading MicroStrategy’s stock on its online trading platform, HSBC InvestDirect. The suspension had been because the Virginia-based business intelligence company had purchased massive amounts of Bitcoin over the past year.
A supposed message from the bank to its customers read that HSBC had prevented users who already own MicroStrategy stock from buying any additional units.
Things got worse in August when several HSBC UK customers took to Twitter to complain that the bank had suspended credit card payments for their Binance accounts. The company eventually published a release saying that it had imposed the restrictions because cryptocurrencies pose significant risks to their customers.
“We take our duty as a responsible lender seriously and want to do everything we can to protect you. We’ll continue to monitor the situation and let you know if anything changes,” the bank said in its announcement.
Regardless of how the banks feel about crypto, they have come to see that blockchain technology will be a key part of improving their operations over time. The Juniper Group recently published a research report claiming that the costs savings for commercial banks that use blockchain could climb as high as over 3,000 percent by 2030.
As for Wells Fargo, the bank has done considerably well with its crypto embrace. In August, the company published a Notice of Exempt Offering of Securities (or Form D) with the Securities and Exchange Commission (SEC). As the form shows, the bank is looking to launch a new pooled investment form that will offer indirect exposure to Bitcoin for its institutional clients.
The fund - known as the FS NYDIG BITCOIN FUND I - is incorporated as a limited partnership between Wells Fargo and the New York Digital Investment Group (NYDIG) - an investment platform that focuses on crypto. An alternative asset manager, FS Investments will also participate in the fund’s launch.
Per the filing, Wells Fargo Clearing Services, a Wells Fargo subsidiary, will take in payments and servicing fees for customers referred to the fund. The company is expecting the fund’s validity to last over a year.