The world’s banking giants may or may not adopt cryptocurrencies at some point, but they are clearly looking to adopt the distributed-ledger technology that undergirds digital money. In the latest such move, Wells Fargo & Co. and HSBC Bank plc early Monday announced they have agreed to process cross-border transactions between the two big banks on a shared blockchain.
To start with, the technology will support transfers in U.S. dollars, the euro, the Canadian dollar, and the British pound sterling, but the banks say they plan to process more national currencies soon.
The blockchain’s efficiencies will help reduce transaction-processing costs for both institutions, they say, and provide both banks with up-to-the minute indicators of settlement status.
The announcement marks the first time either bank has used this technology in the settlement of cross-border payments. “We are extremely excited to be collaborating with HSBC on a project which places both organizations at the forefront of blockchain innovation,” said Mark Jones, co-head of macro at Wells Fargo Corporate & Investment Bank, in a statement. “We believe this will be the first step of many utilizing transformative technology across our industry in the years ahead.”
The shared ledger will let both banks settle payments on an agreed-upon schedule at multiple points during the day. The new capability also draws on a platform called FX Everywhere that was deployed by HSBC three years ago and has settled more than 3 million intrabank trades totaling $2.5 trillion, the bank says.
The two parties don’t rule out adding more currencies, including one particular native blockchain currency that is drawing increasing attention among bankers. “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,” said Mark Williamson, global head of FX partnerships & propositions at HSBC, in a statement. CBDCs , which are digital versions of national currencies, have drawn increasing interest as central banks explore the potential for such capabilities as near-instant transaction settlement.