Banking giant HSBC has revealed recently in a press release that it applied Blockchain technology in forex transactions amounting $250 billion in 2018. The press release stated that the bank successfully handled a whopping 3 million transactions through its homegrown blockchain platform called FX Everywhere which was launched in February last year.
These figures are quite impressive for HSBC given that distribution ledger technology-based platform could do this is in about only ten months. The bank said that it made important efficiencies using FX Everywhere, indicating that the financial sector is ready to make legit use of blockchain technology on an industry-wide scale. The platform helps to execute forex transactions across HSBC’s internal balance sheets.
Interestingly, HSBC also made a trade finance transaction using blockchain, making it the first major bank to do so. It was soybean shipment from Argentina to Malaysia. In October last year, the multinational financial institution also facilitated the launch of blockchain trade finance platform, eTrade Connect. This platform has been able to reduce the time taken for trade loan approvals from 36 hours to a mere 4 hours.
According to Richard Bibbey, interim Global Head for Forex and Commodities, the technology has allowed them to conduct thousands of forex transactions within the bank spreading across several different balance sheets in a large number of countries and that too within a very short period. However, he also adds that $250 billion is just a small piece of the cake from the bank’s total forex volume. The world’s fifth largest bank has over a whopping 7500 offices in 80 countries.
Risk-averse financial institutions have traditionally known to avoid technologies which aren’t sufficiently tested. As per reports, HSBC is now looking to use blockchain technology to help multinational clients for cross border trade transactions to manage forex flow within organizations. This will definitely reduce costs, but more importantly, it will reduce the time required and scope of human error.
The news comes as a boost for blockchain developers, as the controversial technology has raised more questions than any other tool used in the financial sector. The success of FX Everywhere demonstrates the underexplored potential of blockchain technology and shuns all those who have been criticizing it. Financial institutions have invested heavily in blockchain, and results like these compel us to believe that the investments were wise. The financial service industry had invested $1.7 billion in blockchain technology in 2017 alone.
Initially, large scale test projects had revealed that blockchain technology faces several security and scalability challenges. However, this feat achieved by HSBC is an example that blockchain can definitely overcome those. It is quite sane to believe that quite a few other banks and financial institutions will follow suit and start using blockchain. Therefore, this can be considered as a big breakthrough in traditional financial markets for blockchain, that took the world by storm (heard of Bitcoins?), however, waited very long for traditional acceptance.