Wells Fargo and HSBC to Use Blockchain Tech to Settle Transactions

Banks that don’t move toward crypto “could be left behind,” ProChain Capital president says

article-image

Source: Shutterstock

share

key takeaways

  • Both banks will use Baton Systems’ Core-FX distributed ledger technology
  • Technology allows the bank to settle funds on-demand with HSBC in more currencies than CLS Group allows, according to co-head of macro at Wells Fargo Corporate and Investment Bank

Wells Fargo and HSBC are using blockchain technology for the first time in the settlement process of cross-border payments.

The two financial services titans will jointly use a shared settlement ledger to process US dollar, Canadian dollar, British pound sterling and Euro transactions, the firms announced Monday. 

The companies have plans to extend the platform to settle additional currencies and could choose to add more participants, introducing a central Financial Market Infrastructure provider.

The platform runs on Baton Systems’ Core-FX distributed ledger technology.

Adopters of the technology are no longer restricted by currency-specific cut-off times and can agree with their counterparties on when and how often they settle. It allows for multiple settlements a day and a settlement process that can be completed in three minutes.

Riskless settlement, or payment-versus-payment (PvP) settlement, has previously only been achievable with legally enforceable settlement finality through CLS Group.

Market participants prefer to settle via PvP because the currencies are simultaneously settled — eliminating the risk of a firm having made a payment to a counterparty that then defaults on its obligations, said Alex Knight, head of EMEA at Baton Systems

But access to PvP settlement through CLS is restricted to CLS member firms and only available across 18 currencies, he explained.

“Today’s announcement means that all [foreign exchange] businesses can now access PvP settlement protection across all currencies,” Knight told Blockworks. “We’ve used distributed ledger technology to achieve this, delivering a level of transformation that’s well overdue.”

Traditional finance embracing the space?

Banks currently transmit files to CLS and then get funds settled the next day between accounts held at CLS, said Mark Jones, co-head of macro at Wells Fargo Corporate & Investment Bank, adding that the funds are held up during the waiting period. 

“This new technology would allow us to settle funds on-demand with HSBC in any array of currencies we choose,” Jones told Blockworks. “[It] also provides greater visibility into transactions and funds flow because both of our operations teams at [Wells Fargo] and HSBC are utilizing the same dashboard at the same time.”

Large banks sharing technology infrastructure with shared transaction visibility is a new concept, the Wells Fargo executive added. 

David Tawil, president of multi-strategy crypto asset fund ProChain Capital, said that banks that do not look to implement blockchain and accept cryptocurrency more broadly could be hurt over the long term.

“I know that right now it’s incredibly difficult for those banks to participate in cryptocurrency broadly because of the lack of regulation,” he said. “But certainly there should be education and development going on inside of those banks to be able to act and get involved once they are allowed to.”

Tawil argued that financial institutions should work together to figure out how they can use blockchain technology collectively to facilitate transactions and perform other processes across their systems.  

“Right now the decentralized aspect of this is a runaway train without them,” he noted. “If they don’t have a pre-planned way to go ahead and transition to getting onto that locomotive, they certainly could be left behind.”

Knight said that Baton Systems is in discussions with nearly all of the large foreign exchange banks about its technology, noting that some are evaluating its impact on their businesses.

Continuing to adopt

Mark Williamson, global head of FX partnerships and propositions at HSBC, said in a statement that the firm will continue to grow its FX Everywhere network, which has settled roughly 3 million intra-bank trades worth about $2.5 trillion since it launched in 2018. 

HSBC also intends to position itself to be able to transact in new forms of regulated digital currencies, such as central bank digital currencies (CBDCs), he added.

Wells Fargo labeled cryptocurrencies as a “viable investment asset” in a report published earlier this year. It noted that crypto could see continued growth, further compression in price volatility and a possible role as portfolio diversifiers over the long term.

“We are now utilizing blockchain technology, and expect that trend to continue to grow,” Jones told Blockworks. “As it relates to the crypto ecosystem, it’s clearly evolving fast and we are paying close attention to how the regulatory structure unfolds around it.”


Get the day’s top crypto news and insights delivered to your inbox every evening. Subscribe to Blockworks’ free newsletter now.


Tags

Upcoming Events

Javits Center North | 445 11th Ave

Tues - Thurs, March 18 - 20, 2025

Blockworks’ Digital Asset Summit (DAS) will feature conversations between the builders, allocators, and legislators who will shape the trajectory of the digital asset ecosystem in the US and abroad.

Brooklyn, NY

TUES - THURS, JUNE 24 - 26, 2025

Permissionless IV serves as the definitive gathering for crypto’s technical founders, developers, and builders to come together and create the future.If you’re ready to shape the future of crypto, Permissionless IV is where it happens.

recent research

Unlocked Advisory-min.png

Research

This report distills Blockworks Advisory’s research on incentive programs and their analysis, offering a foundation for designing future initiatives and advancing industry-wide standards. By highlighting key lessons and methodologies, we aim to empower protocols to make informed, data-driven decisions.

article-image

Programmable yield, seamless swaps and decentralized control are the hallmarks of a new stablecoin model

article-image

Crypto is “really exciting,” former SEC Commissioner Paul Atkins said in a podcast interview last year

article-image

Bitcoin is now the “seventh most valuable asset in the world by market cap, just behind the likes of Google and Amazon,” GSR’s Brian Rudick said

article-image

Many analysts expected bitcoin to top $100K before year-end, though it’s been on a post-election tear

article-image

Will investors take a 10% lower return to get access to a regulated investment wrapper?

article-image

Brian Armstrong called out the hire of Gurbir Grewal, who had been the SEC’s enforcement division director since 2021